VAT rise to result in double-digit price increases, UKH warns
UKH said “keeping VAT at 12.5% would have supported operators trying to absorb this tidal wave of cost increases, which come as consumers face their own cost of living crisis
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VAT in hospitality will rise from 12.5% to 20% on 1 April 2022, which UKH said “will result in double-digit price increases for consumers as operators struggle to survive” as the sector is forecasting cost inflation running at 18%.
Recent business surveys show the industry is facing a 95% hike in energy bills, 19% in labour costs, and a 17% and 14% rise in food and drink prices, respectively.
UKH said “keeping VAT at 12.5% would have supported operators trying to absorb this tidal wave of cost increases, which come as consumers face their own cost of living crisis”.
Charlie Gilkes, founder and director of bar, restaurant and club operator The Inception Group, said: “In April hospitality is faced with a cliff edge, with an increase in national insurance, an increase in the national minimum wage and a substantial increase in business rates. This is on top of soaring energy and food costs.
“The Government could have helped ease the pain and aided the recovery by keeping VAT at 12.5% for longer but now the sector is also faced with this returning to 20%. Inevitably this is going to be incredibly tough to bear and will massively exacerbate inflation.”
UKHospitality CEO Kate Nicholls said: “Given the unfolding cost-of-living crisis for consumers and soaring operating costs for businesses the return to 20% VAT for the sector will prove nothing less than catastrophic.
“The now inevitable price rises for consumers will dampen demand and many hospitality businesses – one in three having less than a month of cash reserves and most are carrying heavy debt burdens – will fail as a result. This can only cause the UK’s wider economic recovery to falter.”
She added: “If the sector is to have any hope of playing its full role in fuelling the UK’s recovery then we need support.
“We will continue to work closely with the government to achieve the best possible trading conditions for the industry, keep pushing for reform of fundamentally unfair and crippling business rates, play our role in solving our workforce crisis and persist in making a case for the clear benefits a permanently lower rate of VAT will have. A move which has support not just from UK consumers but a significant number of MPs as well.”
