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Up to 310,000 hospitality jobs at risk without 5% VAT extension

Published:  14 January, 2021

Up to 310,000 jobs across the hospitality and tourism sector are at risk without an extension of the reduced 5% VAT rate, a new survey has revealed. 

The survey of 1,144  businesses, conducted by UK Hospitality (UKH), the Cut Tourism VAT (CTV) Campaign, the Tourism Alliance and the Association of Leading Visitor Attractions, demonstrated the importance of the decision by the Chancellor to cut VAT to 5% for the industry. 

The survey showed if the VAT rate reverts back to 20% in April there would be further cut-backs and job losses, estimating this could mean the loss of 310,000 jobs in hospitality and tourism. 

It would also likely lead to an increase in prices to consumers just before Easter, the trade bodies warned.

“The decision of the Chancellor to cut VAT to 5% last July was one of the few bright spots of the year and stimulated economic growth before the second wave began to hit.

"If the government wants to see a turbo-charged recovery in communities right across the UK then an extension of the VAT cut is the surest way to do it – creating jobs, investment in our high streets and helping customers get a cheaper hospitality experience,” said Kate Nicholls, CEO of UKH.

A total of 90% surveyed said the VAT cut was important, very important or crucial to their businesses with more than 75% saying they might not have been able to continue trading without it.

Most businesses said they had used some of the VAT reduction to meet the additional costs of Covid compliance, while the next most important use had been to pay wages and suppliers.

A total of 72% said if the reduction continued they would use it to fund investment. 

The trade bodies took the opportunity to reiterate their call on the government for further extension of the reduced rate of VAT. 

The Chancellor previously extended the end date of the reduced rate from December 2020 to the end of March 2021.

The Wine & Spirit Trade Association (WSTA) also called on the Chancellor to extend the VAT reduction today as well as the duty cut for alcohol.