Nearly 2,700 hospitality sector businesses leasders urge tax reforms in letter to Chancellor Rachel Reeves

VAT rates for British pubs, restaurants, hotels and night-time venues must be lowered in line with the rest of Europe if the UK is to avoid “a bloodbath of hospitality business closures” this year. 

That’s the main message of a letter from West Midlands News to Chancellor Rachel Reeves signed by 2,666 hospitality industry business owners.

The current 20% is currently far higher than the rate levied on hospitality businesses across EU, where the average is 11%.

“A targeted reduction would stimulate demand by keeping prices affordable and restoring margins that are currently suppressing investment and hiring,” the letter says.

It also calls for an easing of the cumulative burden of labour costs and business rates.

‘Rebalancing these pressures would allow hospitality businesses to flourish, not flounder’

Current levels of business rates relief for hospitality businesses, along with recent changes to National Insurance, are “actively discouraging recruitment in one of the UK’s main job-creating sector,” the letter says.

“Rebalancing these pressures would allow hospitality businesses to flourish, not flounder.”

The third point in the letter is a pledge by the sector to “work together to deliver a booming UK economy.” 

The letter – addressed to Reeves with Peter Kyle, Secretary of State for Business & Trade, Gareth Thomas, Minister for Business & Trade with the hospitality sector in his brief, and Lisa Nandy, Secretary of State for Cultre, Media & Sport – comes after a roundtable business breakfast, at Hotel du Vin Birmingham, hosted by West Midlands News for hospitality sector leaders.

‘There will be a bloodbath of hospitality business closures this year’

Among the signatories are Kate Nicholls, chair of UKHospitality, and Conrad Brunton, founder of the Midlands Hospitality Network and managing director of Tonic Talent, a recruitment firm for the hospitality sector.

Conrad said: “There will be a bloodbath of hospitality business closures this year, and with that, redundancies, if the industry does not get support. 

VAT on hospitality in the Republic of Ireland is soon to be 9% – but across the border it’s 20%

“To help the hospitality industry, the best shot in the arm we could have is VAT coming into line somewhere closer to where the rest of Europe is. Right now in the Republic of Ireland, you’ve got VAT going down to 9%, and then across the border in Northern Ireland, you’ve got VAT at 20%. So coming into line on VAT is what’s needed.”

Kate said: “The UK has one of the highest rates of VAT in Europe, and it’s holding back our hospitality businesses. It was great to join this roundtable and hear from operators across the region about how a lower rate of VAT would be a significant boost to their businesses, allowing them to invest and grow.”

Prompt government action required

Rick Cressman, owner and managing director of Nailcote Hall, located in Warwickshire, between Birmingham and Coventry, added: “Without the government taking prompt action to lower VAT in line with the rest of Europe, together with adjustments to the recent business rates demands, then thousands of people in the hospitality sector are likely to lose their jobs as ever more businesses close.

“It would be a sad indictment on this government that even more young people will be left without opportunities they should have had in this industry. Inaction would be disgraceful.”