Chancellor warned

Hospitality groups call for VAT cut to avoid closures

Iron Horse Glasgow
Pub closures have accelerated, say trade groups (pic: Terry Murden)

More pubs, restaurants and hotels will close unless the Chancellor takes urgent action to reduce their costs, according to a new report.

Jeremy Hunt has been urged to cut VAT and excise duty to prevent thousands of outlets running out of cash.

A joint survey by some of the hospitality industry’s biggest trade bodies found that a quarter of venues had exhausted their reserves.

Higher Energy and wage bills together with the impact of the pandemic meant that between December 2019 and last December, the number of licensed premises across the UK fell from 116,203 to 99,113, a net loss of 17,090 venues.

The survey, conducted by CGA by NIQ for UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster, found that on top of the 25% that had run out of cash, a further 29% were sitting on less than three months’ worth of ready reserves.

In a joint statement, they said: “We’ve already seen too many good businesses shut up shop. That has left cities, towns and villages without a vital community asset where people can meet, host events and share enjoyable experiences.

“It’s clear that practically no business has been immune to the relentless price increases that have plagued the sector and can absorb costs no longer, with many already forced to pass these on to customers.”

They said there is a need to take immediate action, with a cut in VAT as the number one priority.

Kate Nicholls, chief executive of UKHospitality, said that unless changes were brought in, the closure rate in the hospitality sector could double from 2.9% last year to 6% this year.

Kate Nicholls
Kate Nicholls: closures could double

“However good the top line is, it’s never been harder to turn a bottom-line profit because of the cost pressures,” she said. “You can see the demand is there, but the profit is diminishing. For an increasing number of independents, in particular, you’re seeing business failures and closures coming through.”

Sir Tim Martin, the chairman and founder of JD Wetherspoon, has long insisted that the differential between supermarkets and pubs has to close. He has pointed out that supermarkets can use the VAT that pubs pay on food sales to cut the price of beer, encouraging more people to drink at home.

Trade associations representing more than 400 drinks producers and hospitality venues have signed a letter to the Chancellor arguing that cutting duty would raise more money through increased consumer spending.

The letter says: “Not only would a cut in alcohol duty help reverse this trend of depressed consumer spending, but it would also generate revenues to the Exchequer at a time when it is needed most.”

The move follows a warning from the Scotch Whisky Association last month that increasing competition from premium spirits in global markets puts future investment, growth and jobs at risk without government support.

In the 2023 Spring Budget Jeremy Hunt raised duty on Scotch whisky by 10.1% – the biggest alcohol tax hike in nearly 50 years.

In his Autumn Statement he chose to return to the duty freezes that the industry says will incentivise investment and boost Treasury revenue.

See also:

Venues ‘should ban political events’ over car policy



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