Keeping VAT at 12.5% vital for sectors 'return to financial strength'

17-Mar-2022 - Last updated on 17-Mar-2022 at 10:12 GMT

Return to financial strength: APPG finds keeping VAT at 12.5% vital to help hospitality play its crucial role in the UK's economic recovery (Credit: Getty/MicroStockHub)

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An inquiry held by the All-Party Parliamentary Group (APPG) for Hospitality and Tourism has called for VAT to remain at 12.5% beyond March.

The inquiry examined seven areas in which maintaining 12.5% VAT would benefit the sector.

This included helping businesses recover financially after the pandemic, improving the rate of employment, stimulating further economic activity, supporting regional growth, improve international competitiveness, easing cost of living pressure and improving social wellbeing.

APPG chair of hospitality and tourism and East Devon MP Simon Jupp said: “Having sought views across the industry, it’s clear keeping the reduced rate of VAT will help the hospitality and tourism industry get back on its feet after an exceptionally difficult two years. It’s really important to support the industry to help showcase the best of the UK.”

Crucial role

The APPG’s call cited data from a UKHospitality (UKH) member survey, which found nine in 10 businesses believed retention of 12.5% VAT was crucial to their recovery.

Writing in the Inquiry into the Retention of the 12.5% Rate of VAT report, UKH chief executive Kate Nicholls said: “The hospitality and tourism industry has been the hardest hit by the Covid pandemic.

“However, with the right support, it can play a crucial role in the country’s economic recovery and help rebuild people’s wellbeing after they have had to live under social restrictions for the past two years.

“Hospitality and tourism is a major economic sector, its businesses are community hubs that bring everyone together, across the entire nation. This will remain true as we learn to live with Covid. However, for businesses to provide the best possible service, they need to return to financial strength.”

The UKH member survey also showed the majority of regions in the UK employ more than 650,000 people in hospitality and receive more than £3.5bn in tourism expenditure from visitors with domestic tourism redistributing £25bn per annum from urban to rural and seaside economies.

Vital support

Furthermore, the inquiry report stated retaining the current 12.5% rate of VAT was vital to support the industry in playing a key role to the UK’s economic recovery.

APPG vice chair and Glasgow MP Alison Thewliss said: “This report has been helpful in consolidating the evidence around what industry leaders have been telling us for some time, a move away from the 12.5% VAT would put the brakes on investment and growth.

“Without continuation of this rate, many businesses and cultural institutions will be put at risk, at what is already a perilous time for recovery.

“The UK Government must pay attention to the thorough research provided by this report and take the steps needed to protect the industry.”

To read the full report click here.