Cast your minds back to March 2020 when the country was forced into lockdown, effectively closing all businesses apart from those deemed ‘key’. Millions of people were put on furlough, and the Chancellor of the Exchequer introduced a 5% UK VAT cut to support businesses.
Set to expire on 31st March 2021, hospitality groups successfully lobbied to have this extended until 30th September, where VAT was then raised to 12.5% for six months.
Unbeknown to anyone though (except the Chancellor himself?) this six months would end at the worst time imaginable – as the return to 20% VAT has coincided with the biggest set of threats to living standards for decades.
Energy bills have risen by a whopping 54%, Council Tax has gone up, water and fuel is astronomically expensive – effectively everything is costing much, much more across the board. As consumers are forced to tighten their purse strings, hospitality businesses are having to raise their prices – creating what is effectively an uncontrollable cycle of horror for all.
It all comes after a nightmare couple of years for the hospitality industry, first the pandemic with its lockdowns, tier systems and restrictions, and now this – which has been effectively ignored by a government that has economically failed across the board.
UKHospitality, the country’s leading voice of the sector, have warned that the VAT increase leaves operators with no choice but to pass on costs to consumers – as recent surveys show that the industry is now faced with a “95% hike in energy bills, 19% in labour costs, 17% rise in food prices and 14% rise in drink prices.”
Kate Nicholls, Chief Executive of UKHospitality explains further that the “price rises for consumers will dampen demand and many hospitality businesses – one in three having less than a month of cash reserves and most are carrying heavy debt burdens – will fail as a result. This can only cause the UK’s wider economic recovery to falter.”
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It’s an unavoidable position that restaurateurs and business leaders face – increasing prices when customers already have considerably less disposable income – it’s just not going to work. And some of the city’s venues have been vocal about these issues across social media this week.
The Hip-Hop Chip Shop took to their Instagram to highlight all of the price increases that they face, alongside the VAT rise – “a BIG leap” back to 20%.
“Only the most resilient have made it this far… mostly because of the burden of huge loans taken out to survive. The previous VAT decrease helped whilst sales were way down.”
We also spoke to Julian Pizer, co-owner and Head Chef at the new restaurant Another Hand on Deansgate Mews and he’s not as concerned about the VAT, it’s more the price increases.
“To be honest the VAT rate going back to what it was pre-COVID was expected and not our biggest concern. For us it’s the 43% price rise on power and another 43% in October. That will be what cripples small business like ours.”
“It’s a joke that that’s the way they want to reclaim the money lost over COVID. I don’t know how families will survive, let alone businesses, it’s a sure fire way to ensure another recession if you ask me.”
With so many people working in the hospitality sector, and millions more who are directly affected by it, these price hikes and VAT rise will only exacerbate problems across the board – it’ll effectively stop any potential for growth or demand at the city’s bars and restaurants.
The wider media has coined this Friday 1st April as ‘Bleak Friday’ and I can’t think of another word (that isn’t a swear word) that so perfectly encapsulates the current mood of the country – with seemingly no end in sight of the misery.
For a positive affirmation platform who actively encourage our followers to go out and support the city’s independent businesses, this puts us in a difficult position.
All I can say though is that if you can do it – please do. There’s some truly fantastic venues in (and out of ) the city, and there’s some great lunch deals, evening offers, happy hours and plenty more that will help soften the blow to your wallet, whilst still being supportive.