Price of a pint could rise by 25p predicts Sacha Lord

20-Sep-2021 - Last updated on 21-Sep-2021 at 13:25 GMT

Tax change: the temporary reduced VAT rate of 5% will rise to 12.5% from 1 October (image: Getty/Jonathan Knowles)

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Night-time economy adviser and operator Sacha Lord estimated prices of drinks will go up by between 7% and 10% with the average price of a pint set to rise by 25p, in line with the 7.5% VAT increase to cover the overall losses felt by operators.

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

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.

Lord went on to call on the Government to extend the reduced rate or the sector could face more redundancies and closed sites.

He said: “The 5% VAT rate was the single biggest recovery measure for the industry over the past 18 months and has enabled venues to stay in business and staff to keep their jobs.

“Removing this relief will have a severe effect on operators across the country. VAT is the biggest expense in any business and is the quickest way to reduce cashflow."

Last orders

He added: “For businesses that have little to no cash reserves as a result of the pandemic, it could be last orders.

“Many operators will be forced to pass the increase onto the customer to stay afloat and we could see prices across food and drink rise by as much as seven to 10% from October as bosses attempt to recover losses and fight the dire financial situation they find themselves in.”

This follows a flash poll by The Morning Advertiser where 63% of the 61 respondents said they were looking to raise their prices as a result of the reduced VAT rate ending.

Some 56% said they were planning to increase prices by 25% or less while 5% will push prices up by up to half (50%) and just 2% were looking to put prices up by 51% to 75%.

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

Devastating consequences

Furthermore, pub group JD Wetherspoon announced it will be increasing the cost of its food by 40p per meal when the 5% VAT rate stops.

In a trading update, the business stated the interim rise to 12.5% in September will mean the pub group will have to push its prices up for meals and said the increase in VAT will mean the entire hospitality industry less competitive.

“The reduced VAT rate is an essential measure to keep the wheels turning and staff in jobs,” Lord added.

“Combine this with rising inflation, the upcoming removal of furlough, the ongoing worry of re-introduced Covid measures and this week's concerns over energy pricing, and we have a tough winter ahead for our nightlife sector. I expect we'll almost certainly see many more venues close for good."
"Operators will take at least three years to recover from this pandemic, and I urge the Government to rethink this rise and extend the current rate until that point.

“The hospitality industry is vital to the UK's recovery and growth. Cancelling a measure which will result in venues closing, staff being made redundant and VAT bills left unpaid through bankruptcy will only hinder, not help the economy. To punish the sector now will have devastating consequences just as it starts to recover."