Hospitality leaders ramp up pressure on Labour to slash VAT
Leaders of top hospitality firms have ramped up pressure on Labour to slash VAT, which they warn is leading to hundreds of thousands of job losses.
Pub chains JD Wetherspoon, Fuller’s and Greene King, as well as hotel giant Hilton and Mexican restaurant chain Wahaca, have thrown their weight behind a campaign to cut Value Added Tax (VAT) from 20 to 10 per cent for hospitality businesses.
The UK’s 20 per cent rate of VAT for hospitality is the second-highest in Europe, behind only Denmark, with France, Italy and Spain charging 10 per cent while Germany charges only seven per cent.
These firms claim that a cut to VAT, which is charged on purchases at pubs, restaurants and cafes, would be the single-most effective intervention to boost the hospitality industry.
Speaking at trade body UK Hospitality’s summer conference on Wednesday, Greene King chief executive Nick Mackenzie said: “We are at a bit of a crossroads […] the loading on of costs, the loading on of taxation is getting to a point where it’s unsustainable.”
Mackenzie said Greene King could be forced to cut its investment in its apprenticeship programme and its scheme for employing former prisoners if the tax burden on the hospitality industry is not eased.
“The lifeblood of pubs in the industry is investment and reinvesting in those pubs, so [a VAT cut would] give us an opportunity to reinvest. The more profit we make, the more we can invest, and that is fundamental,” he said.
Steve Cassidy, Hilton’s senior vice president, said that the UK’s current rate of VAT on hospitality firms is “uncompetitive,” because it disadvantages Britain as a travel destination compared to Hilton’s European rivals.
Cost pressures ‘becoming unsustainable’
Wahaca, Greene King and Hilton have all backed a campaign led by celebrity chef Tom Kerridge, calling on the government to cut VAT.
The campaign, VAT’s The Problem, has linked the UK’s high rate of VAT to the 100,000 hospitality jobs that have been lost in the last two years.
Last week, Kerridge backed Andy Burnham’s bid to become Prime Minister because the Greater Manchester mayor has called for cuts to VAT on hospitality firms and pledged to lower business rates for pubs.
Kerridge said on Wednesday that the government “knows something needs to be done”. He added: “It feels like we are pushing on a door that is slightly open.”
The current tax burden facing hospitality firms encourages a “race to the bottom” because businesses are pushed to cut staffing and compromise on quality, he said.
Fullers: VAT cut ‘critical’
The boss of pub company Fuller, Smith and Turner told Morning Wire that reducing VAT is “critical” for the UK’s hospitality industry.
Simon Emeny said: “I think it’s sadly highly unlikely that the government will reverse the taxes that they’ve imposed on the sector.
“So I see reducing VAT to 10 per cent as the most logical way of this sector, hopefully, attempting to return to growth.”
This growth would “straight away turn on the taps” of employment and would result in bigger tax receipts for the Treasury “further down the line,” he added.
London-listed Fuller’s revealed a six per cent bounce in revenue to £398m on Wednesday, as Emeny slammed “unprecedented government interference” in the pub sector.
JD Wetherspoon, the UK’s best-known pub chain, has also backed the campaign to cut hospitality VAT to 10 per cent, it told Morning Wire.
The government was contacted for comment.