Hoteliers urge new PM to cut VAT

Hoteliers in Bristol are urging whoever becomes the new Prime Minister to cut the rate of VAT to help their businesses survive the post-pandemic threat of soaring costs.

The Bristol Hoteliers Association (BHA) spoke out in the wake of a report from industry body UKHospitality and business property advisor Christie & Co which revealed operating costs in the hospitality sector have risen to 55.2% of annual turnover (before rent), the highest level since 2007.

Prices in the UK are rising at their fastest rate for 40 years, with UK inflation hitting 9.4% in June.

The BHA has long been calling for a reduced rate of VAT for hospitality and leisure businesses and has renewed that call in the wake of growing financial pressures.

BHA Chair Raphael Herzog said: “Even with lockdown restrictions lifted, many hospitality businesses have been unable to open fully due to staff shortages.

“The effect of both Brexit and pandemic lockdowns – which saw staff find new roles elsewhere – means some kitchens have had to stay closed.

“Add to that the increase in minimum wage, increased costs of food supplies and the soaring energy prices, and we are still along, long, way from the road to recovery.

“Some hotels are seeing their gas bills rise from £10-12,000 per month, to around £50,000.

“Whereas a quality steak would cost £5.50 not too long ago, it now costs £10. We’ve seen year-on-year price increases of nearly 40% for bakery/flour purchases, more than 60% for dairy, more than 45% for eggs and egg products and 20% for laundry.

“These are just a few examples of the soaring costs we are facing and why we are calling for long-term Government help.”

In July 2020, the Government announced a temporary 5% reduced rate of VAT for the hospitality industry. This was increased to 12.5% in October 2021.

In April this year, VAT returned to its full rate.

Mr Herzog said: “We will soon have a new Prime Minister and we are hoping that he or she will look to re-introduce a reduced rate of VAT for hospitality businesses.

“This would be a significant step towards supporting struggling hotels, restaurants, pubs and others.

“We are all facing soaring operating costs at a time when many household budgets are being stretched and more and more people are finding it harder to afford to be able to enjoy all that the hospitality sector has to offer.

“At the end of last year, the Government announced grants of up to £6,000 for hospitality businesses. But that would only cover us for what we lose in one day with a conference booking, as an example.

“We need the Government to reintroduce the reduced rate of VAT – at least temporarily but ideally on a permanent basis.

“Right now we have very little revenue, increases in costs and continuing staff difficulties. It’s very hard to operate a business in the current climate, with more money going out than coming in.

“We need more support, not only from the Government, but from other companies and customers to help with our long-term recovery from the impact of the pandemic.”