Hotels, pubs and restaurants are dreading the impending 2.5 per cent VAT rise after a month of low profits. As a result, the British Beer and Pubs Association (BBPA) is calling on the government to delay the tax increase, allowing the industry time to recover. Usually one of the best trading months for the hospitality trade, December 2010 saw profits fall across the board, with customers avoiding the extreme weather conditions. However, the hospitality industry was also affected by cancelled flights, as well as many small businesses opting to save money by avoiding a staff Christmas meal.
Delaying the damage
The VAT rise is set to be implemented on January 4th, and will see the price of beer rise by 2p per pint in supermarkets, and 6p per pint in hotels, restaurants, pubs and bars, with a similar fate for other alcoholic drinks. The BBPA – which counts 96 per cent of the UK's brewers and 66 per cent of establishments as members – has therefore asked the government to delay the increase by 30 days. In a letter to Pubs Minister, Bob Neill MP, the BBPA states that this delay could help the industry recover from December's low profits. Many industries will be affected by the VAT rise, especially due to the increase in cost of raw materials at the manufacturing end being passed on to the retailer and the consumer. The price of cotton and other textiles could also spell rising costs for hotel suppliers like Richard Haworth. However, establishments will be glad to know that food and raw ingredients are still exempt from VAT.