The increase in VAT for hotels from 12.5% to 20% which is effective today, combined with an expected cost inflation of 18%, means that double-digit price increases will come into effect for consumers while operators “struggle to survive”. says UKHospitality (UKH).
The industry body said the industry is facing a 95% increase in energy bills, 19% in labor costs and a 17% and 14% increase in prices for food and drink respectively, and that these pressures have likely increased in recent years. two weeks.
According to the body, maintaining VAT at 12.5% would have helped operators to absorb this tidal wave of cost increases, which come as consumers face their own cost of living crisis. .
UKH added that rising prices at the moment “will wreak havoc on consumer demand, further damage an already fragile sector and have a detrimental impact on the wider UK recovery”, as the sector will be ” unable to fully play its role” in job creation. , investment and tourism.
Before Covid-19, the hospitality industry created £130bn of economic activity, generated £39bn of tax for the Treasury and accounted for 10% of employment in the UK.
The UK is said to have one of the highest tax rates for food and accommodation in Europe, with the VAT rate for France and Spain set at just 10%.
Kate Nicholls, CEO of UKHospitality, said: “The now inevitable price rises for consumers will dampen demand and many hospitality businesses – with one in three having less than a month’s cash reserves and most are heavily in debt – will fail accordingly. This can only derail the wider UK economic recovery.
“We will continue to work closely with the government to secure the best possible trade terms for the industry, continue to push for reform of fundamentally unfair and crippling trade tariffs, play our part in resolving our labor crisis and continue to advocate for clear change. will benefit from a permanently lower VAT rate.
Paul Campbell, sector investor at Hill Capital Partners LLP, added: “It is disappointing that the government has withdrawn virtually all support from a sector that can clearly help drive recovery, growth and create jobs – it has had the opportunity to be much more progressive.
“Hotel businesses are battling an unprecedented wave of cost increases and doing all they can to keep prices low for their customers. But the removal of VAT relief makes this impossible and will lead to more d Inflation and menu prices will inevitably rise.