3 in 5 operators to push prices up after VAT cut ends, flash poll finds

By Nikkie Thatcher contact

- Last updated on GMT

Tax change: the temporary reduced VAT rate will change to 12.5% from 1 October (image: Getty/ hh5800)
Tax change: the temporary reduced VAT rate will change to 12.5% from 1 October (image: Getty/ hh5800)

Related tags: Vat, Legislation, Government

Some 63% of pub operators are looking to raise their prices once the temporary VAT reduction on food, soft drinks and accommodation ends, according to a snap poll from The Morning Advertiser.

Of the 61 respondents, 56% will be increasing prices by a quarter (25%) or less. While 5% plan to push prices up by up to half (50%), just 2% are looking to put prices up by 51% to 75%.

However, 18% of those who voted in the poll are not considering pushing their prices up at all and a further 19% are planning to increase prices.

The temporary reduced VAT rate for hospitality, holiday accommodation and attractions was first announced in July 2020.

Important to businesses

The cut, from 20% to 5%, came into effect from 15 July 2020 and was set to end on 31 March 2021. However, from 1 October 2021, the rate will increase to 12.5%. until 31 March 2022.

When the measure was first announced last year, a survey of more than 1,000 businesses found 90% felt the VAT cut​ on food, soft drinks and accommodation was “important, very important or crucial” to their operations.

In addition, more than three quarters said they may not have been able to continue trading without it.

The research, which was conducted by the Cut Tourism Campaign, UKHospitality, the Tourism Alliance and the Association of Leading Visitor Attractions.

Mixed response

Another study of more than 300 sector executives from Barclays Corporate Banking found 39% of respondents said the VAT cut was keeping them afloat​.

One operator previously told The Morning Advertiser ​the VAT cut was more helpful for her two pubs than lockdown grants or the Eat Out to Help Out scheme.

Northamptonshire-based operator Louise Robinson said the reduction helped recoup the losses from when her businesses were shut.

However, wet-led pubs were disappointed​ as the reduced VAT Rate excluded alcohol with one operator saying he felt “discriminated against”.

Furthermore, at the time, Admiral Taverns boss Chris Jowsey added: “Community pubs receive no benefit from VAT cuts on food alone.”

Related topics: Legislation

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