Hospitality officials have said government plans to raise VAT from current rates of 12.5 per cent to highs of 20 per cent early next month will see some London businesses ‘become unviable overnight’ .
Industry chiefs have warned that Chancellor Rishi Sunak’s plans to raise consumption taxes on food, soft drinks, accommodation and theater tickets pose a serious threat to the viability of the hospitality sector from London.
Speaking to City AM, Kate Nicholls, head of industry body HospitalityUK, said rising consumption taxes would make the UK’s cost of living crisis worse, as she claimed hotel businesses in London would be particularly affected.
As London’s hospitality sector continues its post-Covid recovery from a “tsunami of inflationary pressures”, Nicholls warned the VAT hike is being passed at the “worst possible time”.
“We are very concerned that consumer confidence will plummet and the gradual growth we have seen in London footfall will reverse,” Nicholls said. “This is bad news for London and for the national economic recovery as a whole.”
As the hotel businesses most dependent on international travelers who also have the highest costs, Nicholls expressed concern that the “temporary green sprouts of recovery in London’s hospitality sector” are disappearing.
The comments come after Greater Manchester night economy adviser Sacha Lord called on Sunak to ‘reconsider’ the tax hike as he called the plans for the decision ‘extremely myopic’.
Lord said the VAT increase ‘will only exacerbate the perilous financial situation many businesses find themselves in’, as he urged the Chancellor to keep the current rate of tax ‘to avoid closures in the whole sector and the loss of thousands of jobs”.
“Our industry needs to stay afloat in order to continue to provide these work opportunities and I fear for the survival of many businesses,” Lord said.
“Pubs and restaurants are struggling across the board, with tax hikes, inflated price hikes for produce and ingredients and soaring energy costs, on top of existing covid debt.”
Lord noted that the hospitality sector is a “vital employer” in some of Greater Manchester’s most deprived areas, as he suggested “the hospitality sector is well known for employing university graduates or those who need flexible careers to care for children or the elderly. Parents.”