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UK VAT rate is significant barrier to hospitality growth

13 October 2011 by
UK VAT rate is significant barrier to hospitality growth

The UK's high rate of VAT is one of several barriers to the growth of the hospitality industry, a new report from the British Hospitality Association (BHA) has warned.

The report, entitled Hospitality: Driving Local Economies, is aimed at highlighting the critical role the sector plays in the economic and social life in local communities throughout the United Kingdom.

It comes at a time when decisions likely to affect the economy are being pushed down to local and even parish authorities as a result of the Government's localism agenda. They, along with Local Enterprise Partnerships (LEPs), local Destination Management Organisations and Business Improvement Districts, are likely to impact more heavily on the hospitality sector.

The BHA said it hoped the report would set up a platform for dialogue with those bodies, and would foster "greater understanding of the industry's potential for growth through continuing public support for the various Visit agencies, greater financial encouragement for investment by the industry and a recognition that significant barriers have been created which need to be removed if the potential is to be fully realised".

Among other obstacles identified by the BHA were visa costs and controls, Air Passenger Duty and the regulatory burden. It was these factors that had pushed Britain to 135th place out of 139 in the World Economic Forum's latest Travel and Tourism Competitiveness Index, it warned.

Meanwhile, it pointed to an independent report by Bourne Leisure and Merlin Entertainments that calculated a reduction of VAT on accommodation and attractions to 5% would yield a net benefit to the Treasury. All but two other EU member states currently have a reduced rate of VAT for hotel accommodation, while 12 have a reduced rate for restaurants.

The report also highlighted hospitality's huge financial clout, in a bid to make local authorities and other bodies pay more attention to it. The UK hospitality sector directly employs 2.4 million people, and a further 1.2 million indirectly, meaning that it accounts for 8% of all the nation's jobs. Its share of total direct employment is 5% or below in only 22 of the 406 UK local authorities.

Coinciding with the report's release, the BHA urged its members to contact their local MP and local councillors to make them personally aware of the BHA's campaign to create 236,000 new hospitality jobs by 2015.

BHA chief executive Ufi Ibrahim said: "The BHA is firmly committed to ensuring that local government decisions are not at the expense of the hospitality industry. Rather, we will champion hospitality as an engine of local development, jobs and improved efficiencies."


By Neil Gerrard

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

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