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In the heart of Britain, a storm is brewing. The British hotel industry, which is the cornerstone of the British economy and culture, is facing an unprecedented crisis. As inflation continues to rise, the cost of doing business has become a battle for survival, especially for small independent operators. The industry is currently calling for a reduction in VAT rates in the upcoming Spring 2024 Budget, hoping to ease the financial burden and secure its future.
rising costs
The hotel industry contributes more than £130 billion to the UK economy and employs nearly 3.2 million people, but is struggling under the weight of rising costs. UKHospitality chief executive Kate Nicholls warned there could be additional costs in April, including increases in business rates and the national living wage.
Venues have raised prices in response to rising costs and staffing shortages, Fourth’s data shows. However, this is not enough to keep many businesses afloat. A poignant example is Simon Rimmer’s Greens restaurant, which closed after 33 years in business, a victim of the current economic climate.
Call on the government to take action
Nicholls called on the government to take urgent action in its upcoming Spring Statement, specifically to limit increases in business rates and reduce VAT rates for the hospitality sector. The industry also advocates for an increase in the VAT threshold, a 3% cap on business rates, a reduction in basic rate income tax and support for apprenticeship and training schemes to address resource challenges.
The industry’s plea for help has received cross-party support, with MPs backing calls to cut VAT and reform business rates. Emma McClarkin, chief executive of the British Beer and Pub Association, also highlighted the need for beer duty cuts, long-term reform of business rates and a reduction in VAT for restaurants.
VAT relief: light at the end of the tunnel?
The industry is campaigning to reduce VAT in the hospitality industry to 10% from the current 20%. Supporters believe the move would provide much-needed financial relief, level the playing field for supermarkets and online sales, and potentially increase corporate tax returns in the long term.
Previous instances of VAT relief, such as during the 2008 financial crisis and the COVID-19 pandemic, have proven to have a positive impact on consumer spending and business growth. A petition calling for spending cuts has more than 20,000 signatures, and pressure is growing on the government to take action.
The UK hospitality industry is not just fighting for survival; It is fighting to protect an important part of British culture and identity. The upcoming Spring 2024 Budget could be a turning point, providing a lifeline to struggling businesses and an opportunity to rebuild and thrive in the face of adversity.
As the nation awaits the government’s response, the hotel industry continues to hold its breath, hoping for a brighter future where the cost of doing business does not come at the expense of livelihoods and dreams.
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