Up to £10.3b could be ploughed into the UK hospitality industry if a reduction in VAT is announced as part of the Autumn Statement next week.
That’s according to research from commercial insurer NFU Mutual, which found two thirds (67%) of consumers would increase some spending if VAT is reduced.
Of those people who are likely to increase their spending, 53% said they would spend more on eating out, weekend breaks and leisure.
NFU Mutual said a 5% cut in VAT could provide the average UK adult with extra spending power of £547 per year.
Darren Seward (pictured), hospitality sector specialist at NFU Mutual, said: “The encouraging sign is that there is clearly an appetite for increased spending in the UK hospitality industry amongst consumers.
“With consumer spending coming under some pressure from rising inflation, the Chancellor’s decision to ‘reset’ fiscal policy could possibly include the option of cutting VAT by as much as 5% to support growth.
“Our research suggests that even in a more probable situation of a 1% cut, up to £2.1b could be ploughed into British hospitality sector businesses. With other announcements such as increased infrastructure spending seen as more likely, whether this opportunity can be delivered to customers and benefit UK businesses remains to be seen.”
According to the research, 18-24-year-olds are most likely to spend in general (78%), of which 44% said they would spend more in the hospitality sector.
Seward added: “There is however no guarantee that the spending power of consumers will be ploughed back into UK businesses. Our research also showed increased online spending in 24% of people, which could include spending on imported goods from around the world.
“While the overall Autumn Statement is expected to support growth, any boosts such as a cut in VAT could also be offset by increases in other taxes, meaning that savings aren’t necessarily felt.”
The new chancellor Philip Hammond will deliver his first Autumn Statement on 23 November.
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