VAT rate reversion could risk 310k jobs

A survey of more than a thousand businesses found 90% felt the VAT cut on food, soft drinks and accommodation in July 2020 was “important, very important or crucial” to their business.

More than 75% said they might not have been able to continue trading without it.

The research was carried out by the Cut Tourism VAT (CTV) Campaign, UKHospitality, the Tourism Alliance and the Association of Leading Visitor Attractions.

Operators said if the VAT rate reverted back to 20% in April it would mean further job losses and the CTV estimated this could amount to 310,000 redundancies.

However if the cut was extended, businesses said they would use it to invest in their recoveries, with investment and price reductions for consumers. 

Turnover in the tourism and hospitality sector would be £9bn greater with VAT at 5% compared to 20%, the CTV estimated.

UKHospitality CEO, Kate Nicholls, reiterated the association’s calls for an extension of the reduced rate beyond March 2021.

Surest way

She said: "The decision of the Chancellor to cut VAT to 5% last July was one of the few bright spots of the year and stimulated economic growth before the second wave began to hit.

"If the Government wants to see a turbo-charged recovery in communities right across the UK then an extension of the VAT cut is the surest way to do it – creating jobs, investment in our high streets and helping customers get a cheaper hospitality experience.”

Graham Wason, chairman of the CTV Campaign added: “The results of this survey show not only that reduced VAT has been crucial to the survival of hundreds of tourism and hospitality businesses, but also that what is vitally needed now is the announcement of a continued reduction to boost investment, jobs and the wider UK economy.”

Pub operators have also been calling for an extension of the business rates holiday.