The hospitality sector is facing a crisis point, with Tom Kerridge's impassioned call for a VAT cut to 10% resonating with many in the industry. According to our analysis, this would translate to an annual saving of £432 million for McDonald's alone, £246 million for Mitchells & Butlers and £238 million for Whitbread. Such substantial savings would be welcome news for these companies, but Kerridge's real aim is to level the playing field for smaller businesses, which he claims are struggling to stay afloat under the current tax regime.
With the UK's VAT rate for hospitality currently at 12.5%, Kerridge argues that this puts British pubs and restaurants at a significant disadvantage compared to their European counterparts, where the average rate is 10%. He cites the example of France, Italy and Spain, where businesses have learned to thrive under lower tax burdens, and claims that the UK's failure to follow suit is exacerbating the sector's woes.
The proposed VAT cut has not been without its critics, with Dan Neidle estimating a potential cost to the exchequer of up to £12.4 billion. However, Kerridge counters this by suggesting that while large corporations would indeed reap significant benefits from such a move, the ultimate goal is to enable smaller businesses to grow and ultimately ensure the 'survival of your local pub'.
In recent months, the hospitality sector has faced a barrage of government policy changes, including increases in business rates, National Insurance Contributions (NICs) and the minimum wage. Kerridge acknowledges that these measures have had a disproportionate impact on smaller businesses, which are often unable to absorb such costs without sacrificing profitability or even viability.
As the industry grapples with these challenges, Kerridge remains optimistic about his chances of securing support for his campaign. He has already won backing from several key figures in the sector and is confident that his proposals will be taken seriously by policymakers. Whether a VAT cut will ultimately become a reality remains to be seen, but one thing is clear: the hospitality industry desperately needs a break if it is to continue thriving.