Rachel Reeves told hospitality leaders this week that the government recognised the pressure facing the sector, as operators continued to push for a VAT cut they say is now central to survival, growth and investment.
In a pre-recorded virtual message played out at the UKHospitality Summer Conference in London, the Chancellor of the Exchequer said she knew it had been “a genuinely hard period” for pubs, restaurants, hotels and venues.
Rachel said: “When people feel confident in the economy, you are often first to welcome them through the doors.
“And it’s my mission to drive that confidence up, starting with the Great British Summer Savings this summer.”
She pointed to measures including permanent lower business rates for retail, hospitality and leisure, a cut to draft duty, reform of the apprenticeship levy and a summer reduction in VAT for children’s meals.
Rachel said: “Hospitality employs 3.6 million people across the country.
“It’s woven into the fabric of our high streets, our seaside towns, our city centres.
“When hospitality thrives, Britain thrives.
“And with a government that is committed to growth, I believe the best days are ahead of us.”
But across the conference, industry leaders made clear that while hospitality welcomed recognition from government, the major issue remained VAT.
The discussion came as VAT’s The Problem, the campaign fronted by Tom Kerridge calling for hospitality VAT to be cut from 20% to 10%, approached 200,000 signatures, a milestone it has now reached.
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The campaign has gathered support across hospitality, with operators arguing that a lower VAT rate would bring the UK closer to parts of Europe, ease pressure on businesses and allow the sector to invest, employ and grow.
Nick Mackenzie, Greene King CEO
Nick Mackenzie: ‘The taxation regime is unfair’
Nick Mackenzie, chief executive of Greene King, said the fact VAT was being discussed so prominently was significant in itself.
Nick said: “First of all, it is I think fantastic that we are sitting there actually talking about VAT in the way we are.
“If you’d have asked me six months ago if this is what I’d be talking about it, I probably would have said no.
“I think it is great, particularly with the drive that Tom’s doing to the campaign and the trade bodies supporting it.
“I think it is the right time to be having the conversation.
“Why hospitality versus other sectors? And I think there’s three key things.
“One is I think the taxation regime is unfair on our sector. It’s inequitable, whether you’re talking about duty, whether you’re talking about National Insurance, whether you’re talking about VAT, it’s inequitable.”
“This industry can create growth, can create jobs, and particularly create jobs for young people like no other industry can do.
“So why wouldn’t you back this industry to do that?
“I think what is becoming increasingly understood by governments, is the social value that our industry can bring, whether that is combating loneliness, whether that is social cohesion with pubs, whether that is creating jobs for people who wouldn’t normally be able to get a job.
“Whether you’ve come out of prison or you’re homeless, we can create meaningful jobs and careers for people.”
In a later discussion, Nick warned that increased costs were already forcing operators to make difficult choices.
“We choose to support bringing prison leavers into our business. We’ve aiming to get to 500 of those,” he explained.
“But we could choose not to do that because it costs us money to do it.”
He added: “There are three closures per day in our industry and that can’t be right.
“And if you lose those social hubs, you lose people giving jobs to people who can’t get them elsewhere, then A, you lose tax revenue, B, you lose that social cohesion, and C, you lose the growth.”
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Steve Cassidy: ‘It is extremely uncompetitive’
Steve Cassidy, senior vice president UK and Ireland at Hilton, said VAT had become the issue capable of uniting different parts of hospitality.
Steve said: “We may represent subtly different elements of the hospitality sector, but talking as one voice is crucially important.
“It’s extremely uncompetitive. When I look across the international landscape and you see the different treatment of government in markets, particularly within Europe, where we’re competing for visitors, it’s a different conversation between the hospitality sector and their governments.”
He pointed to Ireland as an example of a more supportive approach.
Steve said: “There is a dialogue there between industry and government that we can aspire for.
“And I think this is a platform for doing that.”
Steve added that while there were multiple factors behind pricing, VAT was part of the wider pressure on operators.
Steve said: “Ultimately, the economic success of our industry, the social success of our industry is born out by how sustainable the profit and loss of the business is.
“And in the last few years in particular, as many commentators have highlighted, we’ve seen national living wage increases, probably rightly so, to a material extent, energy costs inflating to a material extent, that supply chain as a consequence increasing.
“So you’re seeing top line growth, but the margin pressure is significant and VAT plays a massive role in that.”
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Steve Cassidy, senior vice president UK and Ireland at Hilton