Central London Alliance (CLA) calls on the Government to address the UK’s lack of competitiveness on the global tourism market, beginning with a cut to VAT for the hospitality, tourism and leisure industries. Figures from the Office of National Statistics (ONS) show that visits to the UK increased 112 per cent year-on-year, generating £30 billion in revenue, but remain 9 per cent down on 2019 levels.
To rectify this, UKHospitality encouraged the government to reinstate the VAT cuts for the hospitality sector, previously implemented from July 2020 to April 2022. Approaching the upcoming budget announcement on 6 March, CLA backs the demand for action and highlights the need for improved support for hospitality. “Reducing VAT could be fundamental for the future of the hospitality sector,” said Tony Matharu, Chairman of Blue Orchid Hospitality and Founder of Central London Alliance.
“There is still a long way to go to enable the sector’s full return to pre-pandemic levels. If the Government does not offer targeted sectoral support, businesses will close, jobs will be lost and the ability to repair the UK economy will be severely impaired,” he continued. This comes after the announcement yesterday that the UK’s nightlife and hospitality industries are “teetering on the brink of collapse”, with up to 43 hospitality venues across Britain facing permanent closure due to a lack of customer spending and the cost of doing business.
The Independent reported this week that there were more than 10 restaurant and pub closures across the UK each day in 2023, as the number of the country’s licensed premises dropped below 100,000 for the first time. The Federation of Small Business Index for Q3 in 2023 also revealed that hospitality businesses had the lowest level of confidence among all major sectors because of the increase in business costs.
“While the sector has seen a partial recovery from pre-pandemic levels, not enough is being done to support it going forward. Hospitality is the third largest employer in the UK (providing 3.5 million jobs in 2022) and contributes £93 billion annually, as well as a further £121 billion indirectly.”
“Yesterday’s reports from leading retailer Mulberry – reflecting an 8.4 per cent drop in UK sales – resulted in boss Thierry Andretta warning that the lack of VAT-free shopping has hit the retail sector and reinforces the need for a change in Government’s considerations on VAT,” Mr Matharu continued. “In the UK, and disproportionately so in central London, the lack of VAT-free shopping continues to impact the retail landscape, as well as the hospitality leisure and tourism sectors.”
The UK hospitality sector’s employment rate exceeds pre-pandemic levels, but recent increases to minimum wage, outdated business rates (a “21st century equivalent to window tax”, says Matharu), post-Brexit frictions, energy costs, and underlying input cost inflation means GVA growth has slowed. Moreover, the wholesale and retail; accommodation and food; and arts, entertainment and recreation industries accounted for a collective 66 per cent of all insolvencies across the UK in 2023, according to recent findings by the credit check service Creditsafe.
The hospitality sector could be a catalyst for economic growth if given the opportunity. Cutting VAT would accelerate this, while also protecting the sector from the mounting pressures it faces. Together with the reinstatement of tax-free shopping (a scheme whose economic cost would be miniscule compared with the overall economic gain from the increased number of tourists and associated spend in the UK, especially in our capital city), the Government can reduce the flow of insolvencies and stimulate growth and productivity.