One in six UK hospitality businesses say they are at risk of failure within the next 12 months, according to new survey results published as the sector continues to unite behind calls for a VAT cut.
The findings come as the Republic of Ireland reduces its hospitality VAT rate to 9%, with UK trade bodies warning that the cumulative cost and tax burden facing hospitality businesses in the UK remains among the highest in the economy.
The survey, conducted by UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster, found that almost a quarter of respondents, 23%, are currently operating at a loss.
That figure has risen from 15% three months ago.
A further 5% of respondents said their business is no longer viable.
The results show that 16% of hospitality businesses, equivalent to one in six, believe they are at risk of failure within the next 12 months.
Respondents identified a cut in hospitality VAT as the most impactful measure to support the sector, with 89% backing a reduction.
The results have been published as the #VATsTheProblem campaign, spearheaded by chef Tom Kerridge, continues to gather support.
More than 240,000 people have now backed a petition calling for hospitality VAT to be cut to 10%.
The UK currently has the second highest VAT rate in Europe, with Ireland the latest country to reduce its rate for the hospitality sector.
From today, hospitality venues will communicate with customers about the #VATsTheProblem campaign, encouraging them to support the call for a VAT reduction.
In a joint statement, the trade bodies said: “We are seeing the devastating impact of hospitality’s heavy tax burden escalate before our eyes.
“The reality is stark. The number of businesses now operating at a loss is accelerating rapidly and too many businesses are facing the gut-wrenching decision of whether they have to close their doors for good.
“Our local pubs, restaurants, hotels, cafes, and many more, are integral parts of our communities. They create millions of jobs, drive growth on our high street and support cities, towns and villages. The loss of these businesses is more than just numbers on a spreadsheet, it tangibly impacts our society and our culture.
“The Government needs to act to back hospitality and reduce its tax burden. The sector is united – a cut to VAT is the most impactful way to support hospitality and drive growth. The Government should cut VAT to 10%, bringing the UK in line with Europe.”
Tom Kerridge said: “This shows why we need hospitality VAT cut to 10%. Our hospitality culture in the UK is the best in the world, but we continue to be hit with unfair levels of tax.
“Just look across Europe. Almost every other country recognises the need to support hospitality with a lower rate of VAT. Now, Ireland becomes the latest.
“240,000 people agree with us that the Government should act to bring hospitality VAT down to 10%, in line with Europe. VAT is the problem – 10% is fair for hospitality.”
The survey results underline continued concern across the hospitality sector over rising costs, tax pressures and business viability, as operators and trade bodies call for further government support.
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