Hospitality and tourism businesses are calling for the Government to extend the reduction of VAT to 5% or risk thousands of redundancies across the sector.
A survey of more than a thousand hospitality and tourism businesses, carried out by four industry organisations, said Chancellor Rishi Sunak’s decision to reduce VAT from the standard rate of 20% has protected jobs and the survival of businesses in hospitality, hotel and holiday accommodation and tourist attractions.
The survey showed the vast majority of the savings were used to retain staff, pay suppliers or passed on to customers, and now the hospitality and tourism sector says it is vital the reduction is extended well beyond March 2021 as the coronavirus pandemic continues to damage the economy.
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The Cut Tourism VAT (CTV) Campaign, 海角视频Hospitality, the Tourism Alliance and the Association of Leading Visitor Attractions, whose members include the Eden Project and Tate St Ives, said that a third of hospitality businesses could have gone out of business had the Chancellor not already extended the end date of the reduced rate from December 2020 to the end of March 2021.
The survey shows that if the VAT rate reverts back to 20% in April 2021, there will be further cut-backs and job losses. The CTV Campaign, which has dozens of West Country supporters including MPs and businesses such as Newquay’s Headland Hotel, estimates this could mean the loss of 310,000 jobs in hospitality and tourism across the 海角视频.
Also, if the Chancellor does not extend the VAT cut in his March 3 Budget it would likely lead to an increase in prices to consumers just before Easter with Good Friday this year falling on April 2, campaigners said.
If the VAT cut were to continue beyond March most operators would use it to rebuild through investment and price reductions for consumers as well as continue to meet the costs of Covid compliance, the campaigners argue. The survey results suggest turnover in the tourism and hospitality sector would be £9billion greater with VAT at 5% compared to 20%.
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Since the CTV Campaign survey was conducted in a narrow window in December, things have become even worse for the sector with takings in restaurants, pubs and bars slumping by almost 80% between Christmas Eve and Boxing Day.
With an effective lockdown now in place across the country for the foreseeable future, the hospitality and tourism sector is united in its demand for continued financial support.
The four organisations stress a further extension of the reduced rate of VAT must be given by the Treasury to ensure the sector’s survival into and beyond Easter.
Graham Wason, chairman of the CTV Campaign, said: “The results of this survey show not only that reduced VAT has been crucial to the survival of hundreds of tourism and hospitality businesses, but also that what is vitally needed now is the announcement of a continued reduction to boost investment, jobs and the wider 海角视频 economy.”
Kate Nicholls, chief executive of 海角视频Hospitality, said: “Hospitality has been devastated by the Covid crisis that has impacted so many of our lives and livelihoods.
“The decision of the Chancellor to cut VAT to 5% last July was one of the few bright spots of the year and stimulated economic growth before the second wave began to hit.
“If the Government wants to see a turbo-charged recovery in communities right across the 海角视频 then an extension of the VAT cut is the surest way to do it – creating jobs, investment in our high streets and helping customers get a cheaper hospitality experience.”
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Kurt Janson, director of the Tourism Alliance, said: “The temporary reduction in VAT for the tourism and hospitality industry has been vital in protecting businesses, suppliers and employment so returning to a 20% rate would undo all that good work and result in 310,000 job losses.
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“We believe that there is also a huge benefit in combining a reduction in VAT for the tourism and hospitality industry with a reduction in the VAT threshold for businesses.”
A total of 1,144 businesses in tourism and hospitality responded to the survey and 90% said that the VAT cut in July 2020 was important, very important or crucial to their businesses with more than 75% saying they might not have been able to continue trading without it.
Most businesses used some of the VAT reduction to meet the additional costs of Covid compliance and the next most important use was to pay wages and suppliers. The reduction has therefore flowed through to the supply chain.
Respondents were asked to comment on how their attitude to investment might change if VAT were to be 5% indefinitely and more than 80% did so, with nearly all comments indicating a very strong positive impact on confidence and investment and 72% of businesses said they would use some of the reduction to fund investment.
Previous research by the CTV Campaign said longer term reductions in VAT provide a much greater incentive to invest. A permanent reduction in the VAT rate to 5% would be used by hospitality businesses to retain staff and maintain investment and give an incentive to non-VAT registered businesses to expand.