Calls to cut hospitality VAT as inflation hits new high

Hospitality and food industry leaders have called for a cut in VAT to help businesses survive spiralling costs.

Consumer Prices Index (CPI) inflation jumped to a 40-year high of 9% in the 12 months to April 2022, up from 7% in March.

Neil Manhas, managing director and chief financial officer of Pizza Hut UK and Ireland, said the hospitality industry was likely facing “double-digit” inflation across its supply chain.

He called on the government to lower hospitality VAT back to 12.5%, after it returned to its pre-pandemic rate of 20% in April.

Manhas added: “As a global business, we can withstand the challenge ahead, however, small and independent businesses will struggle if support isn’t provided today.”

Sacha Lord, night time economy advisor for Greater Manchester, called for a temporary reduction in VAT on business energy bills from 20% to 5% to help small operators and the “hundreds of thousands” of staff employed by them across the UK.

He said: "Businesses across the board are struggling and I know many who are making tough decisions on how and whether to survive.

"Some in hospitality are seeing energy bills rise to six, seven and eight thousand pounds per month, and this level of payout for businesses recovering post-pandemic, is simply unsustainable.”

Hospitality operators told The Caterer they have been forced to raise prices and cut back on heating and air conditioning in the face of rising energy costs.

The war in Ukraine has made the situation worse and pushed up prices of commodities such as wheat and oils, as well as energy and fertiliser.

Karen Betts, chief executive of the Food and Drink Federation said ingredient price rises had been “relentless” with over 60% of manufacturers reporting that energy price increases were impacting their operations.

She added: “In this context, it’s vital industry and government work hand-in-hand to ensure the cost of doing business is kept as low as possible. For instance, minimising the costs of existing and new regulation, and with a view to responding to shortages in supply in as agile a way as possible.”