A major new campaign – #VATsEnough – is calling on the chancellor Rishi Sunak to make the 12.5% VAT rate permanent for hospitality and tourism to enable sector businesses to rebuild their balance sheets, avoid price increases and accelerate the UK's economic recovery.
The VAT rate for hospitality and tourism businesses rose to 12.5% on 1 October after the Treasury reduced it to 5% last year to support the sector through the pandemic. Under current plans VAT will return to its pre-pandemic level of 20% come April 2022, just as next year's peak season begins.
Trade association UKHospitality is urging customers, suppliers, hospitality venues and employees to lobby their MPs on the need to lock in the 12.5% VAT rate for pubs, bars, restaurants, hotels and other sector businesses.
YouGov polling for UKHospitality found that 57% who had a view believed that the hospitality sector VAT rate should not return to 20% next year and 70% thought the government had a responsibility to support the sector's recovery.
An increase in the rate of VAT levels will inevitably lead to price increases and 49% of the adult population said they would eat out less frequently if prices rose.
Kate Nicholls, chief executive of UKHospitality, said: "Our businesses bring light, life and heart to communities across the country, but are battling huge challenges in terms of labour shortages and the food supply chain after 18 months of desperate struggle due to the pandemic.
"By introducing a permanent 12.5% rate of VAT in his autumn Budget, the chancellor can help us bounce back strongly, keep prices affordable for customers and level up UK jobs. Lower VAT will foster investment in businesses and high streets, accelerating our recovery from the pandemic. Let's lock in VAT at 12.5% permanently."
Nick Mackenzie, chief executive of pub company Greene King, added: "The VAT reduction has helped the hospitality sector stay afloat during the last 18 months, but we are facing continued long-term challenges. At Greene King, we have around 2,800 pubs in communities of all sizes and types, and making 12.5% VAT permanent will allow us to plan, invest, as well as create jobs across the country and support the government's levelling up agenda."
During the pandemic, hospitality and tourism saw spend down £100b and 12,000 licensed venues permanently closed.