UK public support 12.5% vat rate for hospitality and want Government to support sector’s recovery

UKHospitality CEO Kate Nicholls

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JUST one in five (17%) say VAT should return to 20% in April , a new study by YouGov commissioned by UKHospitality, has revealed. The same research shows that the public also believes that the Government has a central role to play in the economic recovery of the hospitality sector.

The representative study of 1,743 UK adults revealed the extent of the cost crunch with a colossal 92% of respondents saying their cost of living has gone up since before the pandemic,  with two thirds of those adults (67%) saying they are cutting back on meals out as a result.

It revealed strong support amongst the public for VAT to remain at its current rate of 12.5% beyond April, a move that will help restrain rampant inflation, which is expected to peak at over 7% in the Spring. Excluding those who didn’t give a view, only 21% believe the Government should stick with its current plan to increase VAT in April for hospitality, with nearly half (49%) wanting the reduced rate to be retained long-term and 30% want an extension to the reduced rate.

An increase in VAT will only further fuel inflation across the nation, which is why hospitality leaders are urging Government to hold the 12.5% VAT rate levied on food, accommodation and tourism – and not raise it to 20% after the March Budget.

Maintaining the current rate will enable hospitality businesses to recover and rebuild following the pandemic, amid a crisis of heavy debt and soaring costs. It will support operators to manage what is being described as the industry’s unfolding ‘cliff edge’ in April when, alongside the VAT rise, employment costs are set to increase, higher business rates kick in, and the rent debt enforcement moratorium ends. 

The UK already has one of the highest rates of tax for food and accommodation Europe. In France and Spain, the VAT rate is set at just 10%, and in Germany and Belgium, just 7% and 6% respectively. Keeping VAT in the UK at 12.5%, while still considerably higher than in competitive markets, would ensure the UK becomes a more affordable desirable destination for foreign and domestic tourists.

UKHospitality CEO Kate Nicholls said: “After two extremely challenging years and, with the unfolding cost-of-living crisis, there is now a very strong case for the Government to use the next Budget to deliver the vital support that these surviving and indebted businesses need, to protect jobs and defend the current fragile recovery.

“Holding VAT at 12.5% will provide vital support for thousands of small, local, community businesses. It will protect jobs at a pivotal moment for the recovery.

“This research shows that our guests are feeling the pinch and that is hugely concerning for an industry and its workforce that are reliant on discretionary spending.  Extending the existing VAT rate of 12.5% will help hospitality operators to hold down their prices, secure jobs and will help keep a lid on inflation.”   

The research by YouGov, which was carried out in February 2022, found:

  • 79% of people who gave a view do not believe that VAT should return to 20% in April.
  • 67% of people are cutting back on going out for meals as a result of the cost-of-living crisis.
  • 92% have seen an increase in their cost of living since the pandemic.
  • Nearly three-quarters (72%) of the public think the Government has a responsibility to ensure that hospitality businesses recover from the impact of the coronavirus pandemic.

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