Rise in VAT to ‘wreak havoc’ on hospitality industry

On 1st April, VAT will rise from 12.5% back to its pre-pandemic level of 20%. The trade body, UK Hospitality says that keeping VAT at 12.5% would have supported hospitality businesses who are trying to “absorb a tidal wave of costs” which are expected to “wreak havoc” and potentially lead to a “wave of business failures.” 

Over the last two years, hospitality businesses have faced countless hurdles, with many yet to recover from the losses of the pandemic and Brexit; financial and those relating to staff, amongst others.  

Recent industry surveys indicate that on top of these acute concerns, the industry is facing a 95% hike in energy bills, 19% in labour costs and a rise of up to 17% in food and drink prices.   

Concerns relating to the rise have from both within the sector and outside; in March the All Party Parliamentary Group (APPG) for Hospitality and Tourism wrote that in its view, VAT should not return to 20% and that keeping the lower rate would “bring benefits including jobs, international competitiveness and social wellbeing.” 

In the weeks preceding the rise, we spoke to many NCASS members who were gravely concerned about what they feel is a blow to the industry at such a precarious time in its recovery: 

“Whilst we are grateful to the government for the help we received with grants and the Eat Out to Help Out scheme, which were lifelines for us; keeping VAT at 12.5% is vital for our business. We have rent arrears, £12k of cancelled bookings in December due to Omicron and a delayed VAT bill from 2020 that we have only just paid back. On top of this, supplier prices keep rising.”  

NCASS continues to lobby in the industry’s best interests and have been heavily involved in the hospitality-wide ‘VAT’s Enough’ campaign; feeding in the interview research we carried out with members.

For more on how we’re supporting our members’ financial welfare, please see our Spring Statement