Some fish and chip shop owners could be driven to commit fraud in the absence of any further tax relief, one industry boss has warned.
The words of warning came from president of the National Federation of Fish Friers, Andrew Crook, who told CityA.M. that the fish and chip industry had felt “abandoned” by the government.
Businesses were struggling to “keep their heads above water,” with a failing tax system exacerbating firms’ struggles in the face of dramatically increasing food prices, he said.
With increasing overheads, some bosses may desperately attempt to suppress their turnover so they do not have to pay their VAT liability, Crook said. An element of this can be common in all cash-in-hand industries, the trade body boss admitted.
However, by reducing the VAT rate, the government would be stimulating economic growth and could even garner a “higher yield of tax receipts,” Crook added. “It needs a complete re-think,” he said.
Despite pleas from across the hospitality and leisure sector, the Chancellor went ahead with plans to return VAT to 20 per cent on food and soft drink sales last month.
It had previously been at 12.5 per cent after Rishi Sunak’s Covid measures for businesses were gradually eased.
The fish sector has been battered by historic levels of inflation in recent months.
Cod and haddock have seen steep increases of up to 75 per cent, as fisherman grapple with hiked fuel and labour costs while potato costs have risen by 30 per cent amid war in Ukraine,
Oil prices have also risen, with the price of sunflower oil leaping 60 per cent in recent months, according to analysis by London insolvency firm CompanyDebt.
Price hikes are hitting businesses just as consumers are tightening their own purse strings, with inflation sitting at a 40-year high last month.
“Horrific” energy bill increases were also plaguing businesses, with many firms hit by break clauses they were not aware of, Crook said.
Some fish and chip shops have faced new gas and electricity rates that are 350 percent higher than before.
“Business is now affected as we do understand people have got a limited amount of disposable income. We are having to increase prices as everyone’s disposable cash is drying up,” Crook said.
The return to pre-pandemic VAT was a mistake, Crook said, pointing to other European countries where tax has been kept at a lower rate for hospitality firms while they recover from the pandemic.
“Fish and chips has probably felt it more than other hospitality firms as we have tighter margins,” he added.
The sector has historically relied on volume of sales rather than making a margin on each meal, although this is changing with the times, the industry chief said.
“We are hoping the Treasury changes their attitude from seeing it [VAT support] as a handout, to seeing it as an investment,” he said.
However, Crook was optimistic despite the challenges, pointing to a summer ahead without Covid restrictions hampering consumers’ seaside holidays. “We have survived two world wars, I’m sure we’ll get through this,” he added.