More than 200 hospitality bosses have called on the Chancellor to freeze VAT for the sector at 12.5 per cent.
CEOs of big names including Stonegate, Pizza Express and IHG Hotels, have urged Rishi Sunak to announce a permanent reduced rate on the Budget on October 27.
They said businesses need more support to fully recover from the devastation caused by the pandemic.
A reduced VAT rate was “without doubt the most important factor in helping us rebuild our businesses,” bosses said.
The government plans to hike the rate back to its pre-pandemic level next year, after it increased from 5 per cent to 12.5 per cent this month.
Benefits of a reduced rate include preventing price hikes for families and enabling the industry to create new jobs, the letter said.
The move would also help aid higher wages and better training and unlock capital to deliver a greener future.
A return to the 20 per cent rate next April signals price hikes for consumers just at the time when they can least afford it,” UKHospitality chief executive Kate Nicholls said.
“For businesses it will undoubtedly set off an inflationary spiral which will undermine wage growth, hit demand and ultimately threaten jobs.
The hike will come as the sector hits a “cliff-edge” at the end of business rates reliefs, with sector bosses also calling for a radical overhaul of the valuation system.
Nicholls added: “On top of this we’re facing a chronic labour shortage, supply chain issues, cost inflation across the board, and rises in the National Living Wage and National Insurance Contributions.”
A VAT freeze would “allow us to circumnavigate the monumental challenges we face and enable operators and their teams to concentrate time and resources on what they do best – driving economic growth and serving their communities.”
The move would also benefit the government’s levelling up agenda, the letter added, with hospitality keen to play its part.