It has been a difficult start to the year for the tourism and hospitality trade, with morale sapped by a series of business closures. Only this week there was another blow to the restaurant scene in Glasgow, where Viva Brazil closed permanently after 13 years of trading on Bothwell Street.

Stories like these have become all too common up and down the UK, as a growing number of operators throw in the towel in the face of unmanageable costs.

But a campaign demanding a major change to UK Government policy reached a notable milestone in recent days, and it may yet cause Rishi Sunak & co to sit up and take notice.

As the March Budget moves ever closer, a petition calling for Chancellor of the Exchequer Jeremy Hunt to cut value-added tax (VAT) to 10%, from the main rate of 20%, for the hospitality and tourism sector has now attracted more than 20,000 signatures. Supporters have held up the proposed measure as a game-changing move that could provide a vital cash boost to operators and stem the tidal wave of closures that has blighted the industry over recent years.

The petition, which was lodged by south of England restaurateur Andy Lennox, states: “The financial hurdles we face are unprecedented and continue to grow. Over recent years, wages have increased by [circa] 20%, food prices have risen by [circa] 11.5%, utilities costs have doubled, and business rates are disproportional in a new online world.

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“The hospitality industry is not asking for special treatment but rather a fair playing field. A reduction in VAT to 10% would provide much-needed relief and help level the playing field with supermarkets and online sales which often benefit from lower tax rates as well as giving parity with Europe.

“It would also be a tax reduction which would be replaced with increased corporation tax returns, so in the long term it would be beneficial to the Treasury.”

Those connected to the hospitality sector and people who follow its fortunes closely will detect a familiarity to the proposal. Campaigners have long argued that the rate of VAT in the UK is too high for hospitality and tourism and hinders its ability to attract consumers, especially during challenging economic times such as these.

They have also long highlighted that VAT is significantly higher in the UK than it is in many European countries, which they say makes the hospitality and tourism offer less competitive on these shores.

Moreover, there is evidence that reducing VAT can make a difference. In the depths of the global financial crisis, the Labour government reduced VAT from the then headline rate of 17.5% to 15% in November 2008 as part of a package of measures to stimulate consumer spending and help lift the economy out of recession.

The Conservative Government then utilised the mechanism for the hospitality industry when Covid-19 struck in 2020, initially slashing the rate to 5% when operators were forced to close or trade under severe restrictions. It was then raised to 12.5% and eventually restored to 20% as Covid restrictions were gradually eased.

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Talk to hospitality and tourism industry representatives and they make abundantly clear the benefit a reduced rate of VAT can have. They underline the difference it makes to the level of cash in a business and how it allows operators to offer more competitive prices to consumers.

Those against the idea will argue the Treasury simply cannot afford to lose the income that a VAT cut for hospitality would mean in the short term. However, the counter argument is that a reduced rate of VAT would stimulate consumer spending, incentivise businesses to invest in new equipment, and encourage them to take on more staff because their outlets have become busier on account of lower prices. Ultimately, supporters argue, a reduced rate will actually generate more income from VAT than is generated for the Treasury at the current level.

With official figures published yesterday showing that annual UK consumer prices index inflation was unchanged at 4% in January, double the Bank of England's target of 2%, industry campaigners say the need to act now on VAT is pressing, as the price of food, drink and energy are all continuing to rise for operators at a rapid rate.

“The UK has one of the highest rates of VAT in Europe, which is a significant drag on our competitiveness on the world stage,” Leon Thompson, executive director of UKHospitality Scotland, told The Herald. “We saw the impact a lower rate of VAT for hospitality had when it was introduced during the pandemic – stimulating demand and generating revenue.

“Businesses across the sector are currently facing a tough economic environment and with the costs of doing business continuing to rise, the sector urgently needs government support. A lower rate of VAT for the sector would help pubs, restaurants, and many more, recover. It would also provide the boost that could keep many in business.

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“Having a lower rate of VAT for hospitality also benefits all aspects of society and the economy, helping to bring prices down, providing businesses with the opportunity to invest and grow and giving consumers greater choice on the high street. Lowering the rate of VAT remains one of UKHospitality’s core asks to the UK Government, and we are continuing to push this at every opportunity, particularly ahead of the Budget in March.”

The hospitality and tourism industry highlights other ways it believes the UK and Scottish governments can help the sector, which was estimated to have lost around 400 outlets in Scotland last year.

As businesses prepare for a rise in the national living wage from April 1, there are calls for Mr Hunt to lower the rate of employer national insurance contributions to 10% and increase the threshold at which contributions are made by employers.

There also remains lingering anger in the hospitality industry that the Scottish Government has not provided the 75% relief from business rates that firms in the hospitality, retail, and leisure sectors south of the Border currently benefit from.

Industry figures had hoped £230 million of Barnett consequentials for Scotland announced at the UK Autumn Statement would help fund this relief, but it is thought this cash is likely to have been diverted by Scottish ministers to other departments such as the NHS.

Scottish ministers maintained the much-valued small business bonus scheme and froze the basic business rates poundage at the Scottish Budget in December. They also introduced 100% relief from business rates for hospitality firms in the Scottish islands.

However, the hospitality industry says fewer firms will benefit from the small business bonus scheme because of changes to the eligibility thresholds introduced ahead of the 2023/2024 financial year. The Scottish retail sector meanwhile has complained that the intermediate and higher property business rates will also rise in line with inflation, though it is worth noting business rate poundage figures will also rise in line with inflation in England in the new financial year.

Given business rates policy would appear to be firmly set for 2024/2025, on both sides of the Border, the main hope for hospitality surely rests on the decisions taken by Mr Hunt in his March Budget.

We can expect industry figures to hammer home their message on VAT very strongly between now and March 6.