A new study by YouGov shows that the Government’s plan to raise VAT to 20% in April has been overwhelmingly rejected by the public.
Only 1 in 5 think that VAT should return to 20% with the research also highlighting that nearly three-quarters of the public believe that the government should play a central role in the recovery of the hospitality sector.
The study, commissioned by UKHospitality, also revealed that 92% of respondents had seen their cost of living rise since before the pandemic and two-thirds said that they are cutting back on meals out as a result.
UKHospitality have said that an increase in VAT will only further fuel inflation, which is why hospitality leaders are urging Government to hold the 12.5% VAT rate levied on food, accommodation and tourism – and not raise it to 20% after the March Budget.
It added that maintaining the current rate will enable hospitality businesses to recover and rebuild following the pandemic, amid a crisis of heavy debt and soaring costs. It will support operators to manage what is being described as the industry’s unfolding ‘cliff edge’ in April when, alongside the VAT rise, employment costs are set to increase, higher business rates kick in, and the rent debt enforcement moratorium ends.
According to the industry body, the UK already has one of the highest rates of tax for food and accommodation Europe. In France and Spain, the VAT rate is set at just 10%, and in Germany and Belgium, just 7% and 6% respectively. Keeping VAT in the UK at 12.5%, while still considerably higher than in competitive markets, would ensure the UK becomes a more affordable desirable destination for foreign and domestic tourists.
UKHospitality CEO Kate Nicholls said, “After two extremely challenging years and, with the unfolding cost-of-living crisis, there is now a very strong case for the Government to use the next Budget to deliver the vital support that these surviving and indebted businesses need, to protect jobs and defend the current fragile recovery.
“Holding VAT at 12.5% will provide vital support for thousands of small, local, community businesses. It will protect jobs at a pivotal moment for the recovery.
“This research shows that our guests are feeling the pinch and that is hugely concerning for an industry and its workforce that are reliant on discretionary spending. Extending the existing VAT rate of 12.5% will help hospitality operators to hold down their prices, secure jobs and will help keep a lid on inflation.”