Over 200 CEOs sign letter urging chancellor to permanently keep 12.5% VAT

Over 200 chief executives of the UK pubs, bars, restaurants, cafés, hotels, leisure parks, nightclubs, entertainment venues, and visitor attractions have signed a letter to the chancellor urging for a permanent cut to VAT.

Ahead of his Budget next Wednesday (27 October), industry leaders have called for a permanent reduced rate of VAT for hospitality and tourism, to support them to rebuild businesses and play a full part in the nation’s recovery – alongside meaningful support on business rates.

The letter highlights the benefits of a permanent 12.5% rate of VAT for the industry, including:

• Putting a halt to price rises for hard-working families
• Enabling the industry to generate new jobs
• Supporting higher wages and better training
• Unlocking capital to deliver a greener future
• Allowing businesses in the sector to remain globally competitive.

UKHospitality chief executive Kate Nicholls said that hospitality is a “critical component” of the UK economy, with the potential to “be at the heart of the Government’s plans to Build Back Better”. 

She added the sector can support job creation, levelling up and the road to net zero.

Nicholls said: “Under current plans, VAT returns to its pre-pandemic level of 20% next April, meaning higher prices for consumers just at the time when they can least afford it. For businesses it will undoubtedly set off an inflationary spiral which will undermine wage growth, hit demand and ultimately threaten jobs.

“It will come at the exact same time as we hit a a cliff-edge of the end of business rates reliefs on outdated valuations – currently hospitality pays 10% of the rates bill for an industry that generates around 3% of GDP. On top of this we’re facing a chronic labour shortage, supply chain issues, cost inflation across the board, and rises in the National Living Wage and National Insurance Contributions.”

She added: “Fundamental reforms are therefore crucial to the industry’s survival, a key part of which will be keeping VAT at 12.5% permanently. This will allow us to circumnavigate the monumental challenges we face and enable operators and their teams to concentrate time and resources on what they do best – driving economic growth and serving their communities.

“Longer term, there is no doubt that a return to the higher rate of VAT will prevent the industry playing its full part in the Government’s levelling up agenda and in delivering its commitment to focus on good work, better skills, and higher wages. That is why it’s vital the chancellor must keep VAT permanently at 12.5% for our sector.”