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UK hospitality sector 'needs more competitive VAT'

28 | 05 | 13

The hospitality sector in the UK has suffered over the past few years as the economic recovery continues to be slow. 

As people are finding their budgets stretched increasingly further, disposable income is being reduced and this, in turn, means individuals are not going out for as many meals as they once did.

Because of this, eateries need to come up with innovative strategies in order to attract more customers through the door. While they cannot directly affect the number of tourists in a location, they should be looking to foster their brand's reputation at every available opportunity. 

Practical action is required

Malcolm Duck, chairman of the Edinburgh Restaurateurs Association, thinks it is time for practical action to incentivise people to go out. Speaking to the Scotsman, he called for a cut in VAT so the country can be more competitive.

He pointed to the fact restaurant owners in Scotland have to pay 20 per cent tax, which is much higher than France and Germany (seven per cent) and Ireland (nine per cent). This obviously puts them at a massive disadvantage, as they cannot make the same kind of profits on food without hiking their prices considerably. 

"A VAT cut would help the industry significantly. It would lead to more employment and ensure businesses which are marginal but doing nothing wrong could survive and prosper," Mr Duck stated. 

The hotelier referenced the fact Edinburgh has fallen out of the top ten in the TripAdvisor Travellers' Choice Awards 2013, despite being ranked at number two for two years, as evidence of negative effects of VAT.

Growth is good 

Of course, it is not just eateries set to boost from such a measure, as there will be knock-on benefits for the catering sector as a whole. A buoyant food scene should see the development of more locations, which spells good news for commercial kitchen suppliers.

Indeed, Mr Duck noted he would use some of the extra money from a VAT reduction to buy some new kitchen equipment. The British Hospitality Association is calling for even more drastic action, as it wants the hospitality sector to only face VAT of five per cent. The body claims the move would pay for itself in the long run through the additional jobs it would create. 

The sector needs certainty 

Maurice Taylor, chief executive of an independent hotel management company, thinks the Scottish hospitality sector is suffering from a lack of certainty over tax. He said a number of potential investors from Bric countries - Brazil, Russia, India, China - have been scared off because they do not know what rate of tax the UK government is going to set.

With the exception of London and Aberdeen - Mr Taylor pointed out their local economies have continued to thrive during the recession - the rest of the UK is now viewed as being unnecessarily risky. 

Until this perception is changed, eateries in the UK will continue to struggle and this will be bad news for the sector as a whole. ADNFCR-16001031-ID-801591056-ADNFCR

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