Next Prime Minister urged to lift VAT burden on Bristol hotels hit by soaring operating costs

August 2, 2022

Hotel bosses in Bristol are calling on whoever becomes the next Prime Minister to help their businesses survive soaring costs by to cutting the rate of VAT.

The Bristol Hoteliers Association (BHA) spoke out in the wake of a report showing operating costs in the hospitality sector have risen to 55.2% of annual turnover before rent, the highest level since 2007.

The research, from industry body UKHospitality and property advisors Christie & Co, emerged at the same time as inflation hit 9.4%, with prices rising at their fastest rate for 40 years.

The BHA, which represents 40 hotels in and around the city with around 4,000 rooms between them, has long been calling for a reduced rate of VAT for hospitality and leisure businesses.

It has renewed that call in the wake of growing financial pressures in the sector.

The cost of everyday items essential for the running of a hotel and its kitchen have soared, with year-on-year price increases of nearly 40% for flour and other baking ingredients, more than 60% for dairy products, 45%-plus for eggs and 20% for laundry.

A quality steak which would have cost a restaurant £5.50 to buy in now costs £10.

BHA chair Raphael Herzog, pictured, said: “Even with lockdown restrictions lifted, many hospitality businesses have been unable to open fully due to staff shortages.

“The effect of both Brexit and pandemic lockdowns – which saw staff find new roles elsewhere – means some kitchens have had to stay closed.

“Add to that the increase in the Minimum Wage, increased costs of food supplies and the soaring energy prices, and we are still a long, long way from the road to recovery.

“We are calling for long-term government help.”

In July 2020, the government announced a temporary 5% reduced rate of VAT for the hospitality industry. This was increased to 12.5% in October 2021.In April this year, VAT returned to its full 20% rate.

Mr Herzog added: “We will soon have a new Prime Minister and we are hoping that he or she will look to re-introduce a reduced rate of VAT for hospitality businesses.

“This would be a significant step towards supporting struggling hotels, restaurants, pubs and others.

“We are all facing soaring operating costs at a time when many household budgets are being stretched and more and more people are finding it harder to afford to be able to enjoy all that the hospitality sector has to offer.

“At the end of last year, the government announced grants of up to £6,000 for hospitality businesses. But that would only cover us for what we lose in one day with a conference booking, as an example.”

He said the government needed to reintroduce the reduced rate of VAT – at least temporarily, but ideally on a permanent basis.

“Right now, we have very little revenue, increases in costs and continuing staff difficulties,” he added. “It’s very hard to operate a business in the current climate, with more money going out than coming in.

“We need more support, not only from the government, but from other companies and customers to help with our long-term recovery from the impact of the pandemic.”

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