As reported by the Financial Times, hospitality firms and organisations in the UK have again urged the Government to permanently lower value-added tax (VAT) and business rates.
It comes in the wake of a difficult, Omicron-affected festive season for many such businesses, which have been left ruing the lost opportunity December would have otherwise given them to build up their cash reserves to see them through the quieter period before spring.
What did the report say about hospitality firms’ Christmas trading?
The FT cited sales data from the trade body UKHospitality and industry tracker CGA as showing that restaurants, pubs and bars were hit by a £3 billion fall in their December revenues compared to the same month in 2019.
Trading on Christmas Day dropped by 60% compared to two years earlier, while there was also a 27% decline in sales on New Year’s Eve, which is usually one of the most lucrative days of the year for firms in the sector – particularly night-time venues.
Owners of restaurants and bars had been counting on the Christmas period being a strong one for their balance sheets, to compensate for losses incurred during repeated lockdowns and other times of restrictions put in place in response to the spread of COVID-19 since March 2020.
Instead, the emergence of the Omicron variant late last year led to the reimposition of such measures as home-working guidance and vaccine passports. This, in turn, caused huge numbers of cancellations of Christmas events, as hospitality businesses were once again forced to deal with plummeting sales.
“Devastating” figures, and a lost chance to rebuild “crucial cash reserves”
UKHospitality said the statistics in relation to this difficult period were “devastating”, with the onset of Omicron having denied venues the opportunity to replenish “crucial cash reserves… delaying the recovery and leaving many businesses exposed going into the fallow winter months”.
Kate Nicholls, chief executive at UKHospitality, said the sector urgently needed support from the Government to “enable it to safeguard jobs”. She called for “the extension of the hospitality and tourism VAT rate at 12.5%”, along with a lowering of rates bills “to allow businesses to recover again”.
While VAT was reduced for hospitality firms at the start of the pandemic, it is currently set to return to 20% from April – and operators in the sector have agreed with the trade body’s call for the VAT cut to remain in place.
UKHospitality has estimated that a prolonged lowering of the VAT rate would cost the Treasury £213 million annually.
Among those backing the proposal was Martin Williams, chief executive of the Gaucho restaurant group. He stated that “the VAT support rate of 12.5% needs to stay permanently for our sector to survive”.
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