The coalition government’s move to raise VAT to a uniform 20 per cent from January next year in yesterday’s emergency budget is a 'missed opportunity' for UK hospitality.
InterContinental Hotels Group (IHG), owner of the Holiday Inn brand, welcomed the government’s efforts to reduce the UK’s huge deficit but said growth would be key to balancing the nation’s books.
Kirk Kinsell, President Europe, Africa & Middle East at IHG, said: “In our sector, we believe the chancellor has missed an opportunity grasped by most of our European partners, to stimulate growth in the tourism sector by cutting VAT on hotel accommodation.
“The tourism industry is the UK’s fifth biggest industry employing 2.7 million. We have the capacity to create up to 200,000 badly needed jobs over the next few years.
“In France and Germany VAT on hotel accommodation has been cut to 5 per cent – stimulating growth, creating jobs and actually increasing tax revenues.
Kinsell said a similar policy here would have boosted the hospitality industry as it prepares for the opportunity to showcase the UK at the 2012 London Olympics.
UK hospitality's tax bill up £1bn
The British Hospitality Association agreed, with chief executive Bob Cotton stating that the hike in VAT would increase the hospitality industry’s tax bill by £1bn.
"When many European governments have reduced the rate of VAT for hotel accommodation and restaurant meals, the increase makes the UK even less competitive," said Cotton.
Tampopo restaurant co-founder David Fox attacked the VAT hike predicting many hospitality businesses would go under as a result.
“I thought that the Conservatives were a low tax party. There is absolutely no doubt that if VAT rises there will be less opportunity for growth in our sector,” he said.
Corporation tax reduction
Alf Orban, tax director at PricewaterhouseCoopers, said that while the VAT increase would put further pressure on consumer spending, the move to reduce corporation tax would be of benefit.
"Hit hard by the recession, this Budget offer some hope to hoteliers and the phased reduction in the corporation tax rate from 28 per cent to 24 per cent is likely to be welcomed by the leisure industry,” he said.
Alcohol duty freeze welcomed
Brigid Simmonds, chief executive of the British Beer & Pub Association, applauded the decision not to rise alcohol duty again stating that “a beer tax freeze will also help the beer and pub sector’s ability to play its part in contributing to much needed economic growth and generating valuable private sector jobs”.
Nick Bish, chief executive of the ALMR, was more guarded in his response. Bish said while there had been no rise in duty the blanket increase in VAT would likely push pub and restaurant prices up 2 per cent and make the battle for custom more intense than ever.
Property company Christie & Co said that with an uncertain outlook for UK growth and constraints on spending it was likely that an increase in the sale of ‘distressed assets’ would occur, as property value growth will be relatively low in the short-term.