Calls for further extension of reduced VAT rate to avoid 310,000 job losses

An estimated 310,000 jobs in hospitality and tourism could be lost if the Chancellor does not extend the VAT cut in his March Budget, according to new findings from the Cut Tourism VAT (CTV) Campaign.

A survey by the CTV Campaign – alongside UKHospitality, the Tourism Alliance and the Association of Leading Visitor Attractions – suggested that beyond March, turnover in the tourism and hospitality sector would be £9bn greater with VAT at 5% compared to 20%.

Last September, Rishi Sunak extended his temporary reduction of VAT rates from 20% to 5% in the hospitality and tourism sector until 31 March 2021.

However, the CTV Campaign’s findings, based on responses from 1,144 businesses in tourism and hospitality, indicated that a decision to return VAT to 20% from April could fail to protect employment and the survival of those businesses.

The survey revealed that 90% of firms said the VAT cut – first announced by Sunak last July – was “important”, “very important” or “crucial” to their businesses, while over 75% said that they might not have been able to continue trading without it.

The CTV Campaign suggested that most businesses used some of the VAT reduction to meet the additional costs of COVID-19 compliance and the next most important use was to pay wages and suppliers.

CTV Campaign chairman, Graham Wason, commented: “The results of this survey show not only that reduced VAT has been crucial to the survival of hundreds of tourism and hospitality businesses, but also that what is vitally needed now is the announcement of a continued reduction to boost investment, jobs and the wider UK economy.”

UKHospitality CEO, Kate Nicholls, added: “The decision of the Chancellor to cut VAT to 5% last July was one of the few bright spots of the year and stimulated economic growth before the second wave began to hit.

“If the government wants to see a turbo-charged recovery in communities right across the UK then an extension of the VAT cut is the surest way to do it – creating jobs, investment in our high streets and helping customers get a cheaper hospitality experience.”

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