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UKHospitality calls for VAT and rates support after worst year on record

01 February 2021 by
UKHospitality calls for VAT and rates support after worst year on record

The worst year of trading on record has left enormous swathes of the hospitality sector on the verge of collapse, UKHospitality has warned.

The trade body has said businesses urgently require further government investment and support if Britain's third largest sector can fulfil its potential in helping to drive wider economic recovery.

As part of its evidence to the Treasury Select Committee Inquiry into the Economic Impact of Coronavirus, the trade association highlighted that four in 10 sector businesses stated that they would fail by mid-2021. Only one in five has enough cash flow to survive beyond February under present levels of support.

Recent figures from UKHospitality's quarterly sales tracker, in partnership with CGA, revealed the devastating impact of the pandemic to the sector in 2020, with sales collapsing by 54%, resulting in a loss in revenue of £72b. The sector's decline is likely to have knocked off more than two percentage points from total national GDP and the impact on the sector has been more than 10 times worse than during the 2008 financial crisis.

The evidence built on previous submissions given by UKHospitality to the Treasury Committee and the recent Budget submission to the Treasury. The trade association stated that the sector will begin to recover when it is able to reopen but can bounce back much more rapidly with the right support in place.

Two proposals were mooted to drive this growth:

  • Extend the VAT cut to 5% to for a further 12 months, and ensure it applies across the broad hospitality sector, to stimulate economic activity.
  • Enact a further business rates holiday for hospitality for 2021/22 to protect communities and repair businesses.

UKHospitality chief executive Kate Nicholls (pictured) said: "Put simply, hospitality is battling for survival. Our sector has been the hardest hit sector by the pandemic and is staring into the abyss. But if the right conditions and support are put in place, we could be justifiably optimistic of the future role hospitality can play in returning the country to growth and boosting employment.

"The VAT cut and business rates holiday were two key measures that government correctly identified in 2020 that would stimulate economic activity and assist businesses. With subsequent lockdowns and restrictions, many in hospitality have been unable to recoup the intended benefits. Extending these measures would act as a critical revival system – saving many jobs and setting up the economy for much need job creation for the rest of the year."

Additional measures needed to support businesses contained within the submission included:

  • Implement a reformed Job Retention Bonus to allow continued investment in the workforce.
  • Extend the repayment and interest-free period for all government-backed loans to 10 years.
  • Defer tax payments further to December 2021, to allow full trading before debts to government fall due.
  • Extend the Job Retention Scheme until the end of June, allowing flexible furlough.
  • Assist the hospitality supply chain so it can support the sector's recovery.
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