Restaurants and bars warn that rising VAT rates will cause prices to go up starting Friday.
According to owners, the rise from 5% to 12.5% was bad timing. One restaurant owner said that businesses are already “hanging on a thread”.
The trade associations have demanded a halt in any future increases in VAT to aid the recovery of the sector from the pandemic.
According to the government, hospitality received “extensive assistance”.
In order to keep them afloat in the face of pandemics, the VAT (tax paid on the purchase of goods or services) was reduced by the TVA rate at pubs and restaurants since July 2020.
The April 2022 sales tax will not return to the 20% it was before the pandemic.
Salima Vellani founder of Absurd Bird restaurant chain, stated that she is “extremely worried” by the rise to 12.5%. She said it was a blow for the hospitality sector.
The chief executive of five chicken restaurants in the United States said, “It is just one after another that we are being struck by.”
We are all hanging onto a thread. “We will need to raise prices.”
Rishi Sunak (Chancellor) stated that the rate of 5% was intended to move the sector and preserve jobs.
Tourism and hospitality sectors were hard hit by the pandemic. Many places had to close during lockdowns. Then, they could only cater to a limited number of people due to social distance measures. Now, staff shortages prevent some from making the best of this recovery.
David Moore, the founder of Michelin-star restaurant Pied à Terre, said he had already told one customer who had a £95 voucher for a 10-course menu, that their meal would now cost £105.
He stated that the government had “couldn’t have picked a more difficult time” to introduce the VAT rise, while his company was having to adjust to rising energy, import and labor costs.
He said, “It doesn’t feel like life has returned to anything like normal.”
We just see so many price increases across the board. Utilities are horrible. Taxes [rise]It is something that I cannot absorb. Every supplier is increasing their prices.
“It is not just vegetables or meat; everything is more expensive now than it was 2 years ago.”
He also stated that his restaurant is currently understaffed, which sometimes meant that table numbers were reduced during peak hours.
Sue Whiston is the finance and operations director of Kuula Poke in Birmingham. She believes that the VAT hike was premature. According to her, the 5% tax rate should be extended another six months.
According to her, shipping costs for Kuula Poke’s products from China, Japan and Thailand had “exploded through the roof”.
She said that mango is something we purchase in large quantities, and suddenly it has increased in price by 20% overnight. We have experienced problems in terms of food availability.
“Only recently, our Japanese main wholesaler said that due to the lack of diesel fuel they could not make deliveries this week.
We are currently in a perfect storm of inflationary pressure, and the VAT is on the rise.
According to her, prices will rise in the sector for all diners.
Revolution chief executive Rob Pitcher believes that prices will rise further next spring, as the VAT rate is increased to 20%.
According to the boss of this bar chain with 66 outlets and approximately 3,000 workers, businesses can’t afford additional costs so they will pass them on.
He stated that the consumer would end up paying twice.
The British Beer and Pub Association, Tourism Alliance, and UK Hospitality have all called for the government’s permanent 12-5% VAT rate to be maintained, instead of increasing it in spring to protect businesses and jobs.
Jointly, they stated that VAT returning to 20% will have “serious implications”, and six out of 10 businesses indicated in a survey it would lead to “likely cutbacks or job losses”.
UK Hospitality’s chief executive Kate Nicholls said that maintaining the 12.5% VAT rate would make the government more effective in securing a quick recovery and building resilience.
A Treasury spokesperson said that the lower VAT rates are a temporary measure meant to help businesses recover from the pandemic.
“The hospitality sector has benefited from extensive support throughout the pandemic through our £400bn Plan for Jobs, with the furlough scheme, grants, tax cuts and deferrals,” he added.