Hotel executives have warned ‘thousands of jobs could be lost’ after the Chancellor ‘missed an opportunity’ to halt VAT increases next month.
It came as retail and industry bosses criticized Rishi Sunak for the lack of support for trade tariffs for businesses hit hard by soaring costs.
Kate Nicholls, chief executive of trade group UKHospitality, said the decision to advance plans to raise VAT on food, soft drinks and event tickets from 12.5% to 20% next month ” could prove fatal” for some companies.
‘This is a real setback for thousands of UK hospitality businesses who are still suffering the devastating effects of Covid and facing a tidal wave of rising costs,’ the industry boss added. .
“Locking VAT at 12.5% would have given a major boost to hospitality businesses and helped the sector in its ambition to bring the UK back to post-Covid prosperity.
“As things stand, thousands of jobs could be lost, the UK will remain uncompetitive with international rivals, and consumers already hard-pressed amid a cost of living crisis will see price hikes in their favorite pubs, bars and restaurants. , further fueling inflation.
Emma McClarkin, chief executive of the British Beer and Pub Association, also criticized the lack of support for the sector.
She said: “We are very disappointed that the Chancellor has decided not to extend the 12.5% VAT rate for hospitality.
“The sector remains on a knife edge as it emerges from the pandemic and the impact of the recent energy crisis and the invasion of Ukraine has ensured that turbulent times will continue for pubs and brewers, just as we hoped to chart the course for recovery.
“The coming months could be some of the toughest yet for our pubs and brewers.”
Wetherspoon chairman Tim Martin said: ‘We are understandably disappointed that the Chancellor has not taken the opportunity to reduce VAT on food in pubs and restaurants to the same level as supermarkets.
“It doesn’t make economic sense for the hospitality industry to be taxed at a higher rate.”
Hospitality, retail and supplier businesses have been hit by a spike in inflation in recent months and expect cost pressures to be further exacerbated by rising living wages nationwide next month.
Many companies will also be affected by the rise in activity rates next month.
At the start of the pandemic, the Treasury introduced a suspension of business rates for retail, hospitality and leisure businesses, which was reversed as pandemic-related restrictions were eased.
The current relief measures, which have already been significantly reduced, are due to end at the end of this month.
Speaking in Parliament, Mr Sunak reaffirmed his intention to introduce new relief for qualifying retail, hospitality and leisure properties with 50 per cent lower relief on tariff bills, but capped at 110 £000 for large companies.
But property adviser Altus Group said hospitality, retail and leisure businesses would see an increase of £3.1billion for the new financial year, the new £1.7billion relief package sterling being offset by increases for other businesses.
Robert Hayton, UK chairman of Altus, said large companies were facing a “dangerous cost from the business crisis that could derail the recovery from the pandemic”, citing “lower relief rates, higher employment costs, an increase in gas and electricity bills as well as other increased operational costs.
Scott Parson, UK chief executive of shopping center giant Unibail-Rodamco-Westfield, added: “With consumers facing rising interest rates, fuel and food prices, retailers are already expecting to an incredibly difficult few months, which will only get worse as the Chancellor once again fails to reform the outdated corporate pricing system.
“While the temporary changes announced are welcome, the permanent reduction in rates is the easiest and most effective way to revive the retail sector and reinvigorate our cities and towns by making them attractive to businesses in which invest.”