On a day full of warnings about price rises and spiraling energy costs, there is one you might have missed.
VAT rises from 12.5% to 20% on Friday April 1, which will lead to "inevitable" price rises in pubs, cafes, bars and restaurants, warns UK Hospitality CEO Kate Nicholls.
Pub bosses Tim Martin, of Wetherspoon, and Patrick Dardis of Youngs have both said prices will have to increase due to the reduced VAT support for businesses.
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“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," said Ms Nicholls
“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.
“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 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.”
VAT was cut to 5% in July 2020 due assist businesses during the coronavirus pandemic. It was raised to 12.5% in October, before returning to 20% today.
Despite the initial fall in tax, few pub groups, restaurants and leisure businesses were able to pass on the benefits of the tax break – which covered soft drinks, food, events tickets, accommodation and other areas – to customers due the financial impact of the pandemic.
Bosses said that lengthy Covid disruption, significant debts and soaring cost inflation in recent months mean the reduced tax level has been used to help absorb costs.
Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), said the VAT rate increase alone is expected to cost UK pubs more than £500 million over the next year.
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