More than 20 key industry associations have formally written to Chancellor Rachel Reeves ahead of the Spring Statement tomorrow (Wednesday 26 March), outlining the severe challenges faced by the sector.
According to the letter, energy prices, rents, supplier costs, and wage increases, combined with the repayment of legacy pandemic debt and rising NICs, have created an unsustainable trading environment.
From April, additional cost increases of £30,000 to £100,000 per business have been projected to push many beyond breaking point.
The coalition of trade bodies and associations, which represent more than 100,000 businesses, called for immediate Government intervention to prevent further economic decline and business closures.
Measures included an immediate reduction of VAT to 15% for the hospitality, events, and cultural sectors and the reversal of the NIC increase.
Critical measure
Signatories to the letter included the Night-Time Industries Association (NTIA), Institute of Hospitality (IOH), Hospitality Ulster, UK Door Security Association (UKDSA), UK Music, Live Comedy Association (LCA), Gamechangers, Leeds Night Time Economy Group and the Soho Business Alliance.
NTIA CEO Michael Kill said: “The reduction of VAT to 15% for the hospitality, events, and cultural sectors is not just a financial necessity; it is a critical measure to avert a looming crisis.
“We urge the Chancellor to take action now to prevent widespread failure across the sector.
“Additionally, reversing the increase in National Insurance Contributions (NIC) is essential, as it disproportionately affects SMEs and businesses within the night-time economy, making it harder to retain staff and operate sustainably.
“Many businesses face additional cost hikes of up to £100,000 per year, risking devastating closures. Without urgent intervention, the UK risks losing vital cultural institutions and creative spaces. We implore the Chancellor to act swiftly to avert this crisis.”
The letter also pointed to international precedents. It cited Ireland’s hospitality VAT cut in 2011, which it claimed led to a 30% increase in employment within five years.
In addition, it referenced Germany’s recent decision to maintain a lower VAT rate to sustain its hospitality sector.
Time to act
By contrast, the UK remains among the highest taxers of small businesses in Europe, putting the industry at a “severe competitive disadvantage”, according to the letter.
Moreover, a recent industry survey found 92% of nightlife businesses have already cut staff, operating hours, or essential investments, while 40% warned they could face closure within six months without urgent support.
NTIA chair Sacha Lord added: “The UK’s night-time economy and hospitality sector are at breaking point. Spiralling operational costs, falling consumer confidence, and a lack of Government support have created an unsustainable environment.
“Since 2019, more than 23,000 businesses have collapsed, stripping the economy of more than £95bn. Yet, instead of offering relief, the Government continues to pile on pressure with tax hikes and rising costs.
“Independent hospitality businesses are the backbone of our high streets, communities, and culture. They drive economic growth, create jobs, and provide vital social spaces. But without urgent intervention thousands more will shut their doors for good.
“The Chancellor must recognise the sector’s value before it’s too late. This isn’t just about businesses; it’s about people, livelihoods, and the very fabric of our towns and cities. The time to act is now.”
