Chancellor lambasted as hospitality gets no VAT freeze in spring statement with ‘thousands of jobs at risk’: Hospitality leaders have blasted Rishi Sunak after the chancellor failed to announce any sector-specific support in his spring statement, warning thousands of jobs were now at risk. The industry has long been campaigning its rate of VAT to be frozen at 12.5%, highlighting both the importance of the sector to the UK’s economic recovery, and to the damage already done to it by pandemic-related lockdowns and subsequent restrictions. Hopes of avoiding a return to the rate of 20% were boosted yesterday (Tuesday, 22 March) when it was revealed that Sunak was weighing up a VAT freeze for hospitality, but those hopes were dashed when the chancellor failed to make any mention of such a move in his “mini-Budget”. Sacha Lord, the night-time economy adviser for Greater Manchester, tweeted: “Two years ago, the chancellor said he would stand by business. Today, hospitality didn’t need a handout, it needed a freeze in VAT. He’s ignored the industry. More businesses will now close, creating more redundancies across the UK. Reckless, harmful and short-sighted.” Kate Nicholls, chief executive of UKHospitality, said: “This is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of Covid, and facing a tidal wave of rising costs. For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal. For a heavily, disproportionately taxed sector a return to 20% dashes the hopes that many businesses could begin to recoup some of the losses of the last two years. Operators in the sector – large and small – have several hurdles to clear on the road to recovery: huge accumulated debts; unprecedented rising costs for energy and raw goods; a chronic shortage of staff; and a fundamentally unfair and crippling business rates regime we’re desperate to see reformed. Locking in VAT at 12.5% would have given hospitality businesses a major boost, and helped the sector in its ambition to lead the UK back to post-cvid prosperity. As it is, thousands of jobs could be lost, the UK will remain uncompetitive versus international rivals, and already hard-pressed consumers in the midst of a cost-of-living crisis will see price rises in their favourite pubs, bars and restaurants, further fuelling inflation. Despite today’s disappointment, UKHospitality will continue to work closely with government to achieve the best possible trading conditions for the hospitality industry – which remains the sector best placed to turnaround the economy – and is buoyed by recent support for our 12.5% VAT call from a significant number of MPs.” Steven Alton, chief executive of the British Institute of Innkeeping, said: “While the chancellor has implemented a number of measures that undoubtedly will reduce the pressure slightly on cash-strapped consumers, the reality for our members is that they have to significantly grow revenues against pre-pandemic figures to even stand still. With devastated profitability, ongoing repayments of pandemic specific debts and rising staff and energy costs, these small businesses needed much more support to enable them to trade out of their fragile positions. We have consistently made the case for ongoing investment in our key sector, operating in every community, being at the heart of levelling up across the UK. The lack of ongoing support is a further significant and potentially fatal blow to these businesses. We will continue to work tirelessly with government to secure the longer term support our sector will need to rebuild, and we will do everything we can now to support our members through the incredibly difficult months and years ahead.” Peter Borg-Neal, chairman of pub-restaurant operator Oakman Group, tweeted: “Unhelpful for businesses”, while Tim Foster, co-founder of Yummy Pubs, tweeted: “Asleep at the wheel”. Graeme Smith, managing director at AlixPartners, said: “This is a significant moment for hospitality and leisure businesses. The removal of VAT relief and the absence of other meaningful interventions today by the chancellor means that the last vestiges of covid support are falling away. The timing of this, as companies deal with unprecedented and, by any measure, extreme cost inflation pressures, will not be lost on anyone in the sector. We are now entering a period when management teams will necessarily be required to understand their businesses at a forensic level and manage margins in real time, so as to best mitigate this pressure. Those businesses that have invested in this complex discipline will clearly have a huge competitive advantage. Understanding what levers to pull, when and to what extent will be critical as businesses seek to navigate their way through what will clearly be a testing time.” Sarah Travell, founder and chief executive of Virgate, the tech-led accountancy and advisory firm, added: “The lack of support for hospitality and leisure businesses in today’s spring statement perhaps speaks directly to a chancellor under pressure to balance the books amid a somewhat downbeat outlook for the public finances over the next 12 months. It does nothing, however, to remove or alleviate the pressure that many businesses are feeling amid an extraordinary period of cost inflation as many emerge from the pandemic. The government, with the removal of nearly all covid-related support and VAT returning to 20% for hospitality, appears to be signalling the end of the crisis and a return to business-as-usual. Yet it feels anything but; companies continue to work to repay accrued debt and repair balance sheets, and at the same time are dealing with genuinely unprecedented cost inflation across every line of the P&L, from energy, fuel, the cost of food and drink, and employment.” Sunak made his statement against a backdrop of inflation rising to a 30-year high of 6.2% in the 12 months to February, and forecast to rise further to 7.4% this year. Growth is now forecast to be 3.8% this year (slashed from 6%) and 1.8% next year, and then, subsequently, 2% to 2026. In a boost to the supply chain and cost-of-living pressures which have increased the pain for hospitality operators, Sunak announced a fuel duty cut by 5p per litre, kicking in at 6pm tonight and lasting until March next year. The chancellor also announced a £3,000 rise in the threshold people earn before they pay National Insurance, to £12,570 a year, from July. However, the 1.5% increase in NI for the new health and social care levy from April still goes ahead. Sunak called his NI move: “A tax cut for employees worth more than £330 a year. The largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade.” Employment Allowance will be increased by £1,000 to £5,000 from a fortnight’s time, while in 2024, for the first time in 16 years, the basic rate of income tax will be cut from 20% to 19%. As previously announced, retail, hospitality and leisure sector businesses will still have a 50% discount in business rates up to £110,000 for the next year.