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Hospitality demands VAT cut as National Living Wage hike looms

February 19, 2024

Hospitality industry bodies have united to demand action from the chancellor as firms continue to struggle under a weight of costs in the tough economy.

A survey by UKHospitality, the British Beer and Pub Association, British Institute of Innkeeping and Hospitality Ulster found that a quarter of operators have no cash reserves left after years of challenges.

They began with Brexit hitting the ability to hire and retain staff and have been further complicated by COVID disruption and the effects of the cost of living crisis.

The groups warned that their members would need help to bring down costs at the budget, due on 6 March, to minimise the risk of further price increases being imposed - hikes that would inevitably stoke inflation in the recession-hit economy.

The alternative, they said, was a surge in unemployment as more businesses would go to the wall.

They highlighted figures revealed last month by NIQ and AlixPartners that showed 6,180 hospitality venues shut their doors for good in 2023.

The survey found that 64% of firms were not optimistic about their business's prospects for the next 12 months, up six percentage points compared to October 2023.

Of particular concern is the looming increase in minimum wage levels. From 1 April a £1.02, or 9.8%, increase to the National Living Wage is due for those aged 21 and over to £11.44 per hour.

In response, 94% of businesses said a reduction in VAT should be a priority for Jeremy Hunt.

Other suggestions to help offset the level of costs included further energy support, capping the business rates increase also due in April and reducing the rate of alcohol duty.

In a joint statement, the industry groups said: "These results clearly show the perilous state our pubs, restaurants, hotels and cafes find themselves in.

"The fact that a quarter have run out of cash reserves completely is a real cause for concern.

"Those businesses are extremely vulnerable to the slightest shock forcing them to shut their doors for good."

Source: Sky News
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