Lower VAT remains operators' top ask for Spring Statement

28-Feb-2022 - Last updated on 01-Mar-2022 at 12:06 GMT

Government ask: operators have also written to the Government, calling for the 12.5% VAT to remain in place (image: Getty/Galeanu Mihai)

Keeping the 12.5% VAT rate on food, soft drinks and accommodation is the most preferred ask from operators to the Government ahead of the Chancellor's Spring Statement next month (March), a flash survey has shown.

The snap poll conducted by The Morning Advertiser (MA) of 60 operators by revealed three fifths (60%) want the lower rate to remain in place while almost a quarter (22%) want a cut in beer duty and a further 15% had business rates reform at the top of their list, while 2% wanted something different to the above.

This follows a poll by The MA prior to the last Budget in October last year, where most operators opted for keeping the lower VAT rate then.

However, at the Autumn Budget, Sunak made no reference to the 12.5% VAT, leading to disappointment from many in the trade.

Letter written

Earlier this month (February), more than 250 hospitality business leaders wrote to the Chancellor, urging the Government to keep the lower rate beyond March 2022.

The letter, spearheaded by UKHospitality (UKH), highlighted the success of the lower rate VAT in helping businesses survive “the ravages of the pandemic”. It also stated the policy has allowed businesses to keep their prices as low as possible in the face of significant cost pressure to the sector.

Signatories to the letter include individual businesses, SMEs and huge multi-national enterprises, including JD Wetherspoon, Marston’s, Punch Pubs and Rekom.

If VAT were to rise in March, businesses would be forced to significantly raise their prices, putting pressure on the cost of hospitality experiences and fuelling inflation across the economy.

Lower rate outcome

UKH has also urged the Government to keep the lowered VAT in order to limit inflation. In a recent study of its members, 93% of companies said they would increase prices by 11% in the coming months- double the headline rate of inflation in December 2021.

Furthermore, a report commissioned by the British Beer & Pub Association, UKH, the Tourism Alliance and the Association of Leading Visitor Attractions revealed keeping the VAT at 12.5% could generate £7.7bn of additional turnover over the next decade.

The report showed keeping VAT at 12.5% could also create 286,850 jobs and £4.6bn generated in net present value of fiscal gains to the Treasury in 10 years, while the Government could see a positive return on its investment in the sector in less than five years.