Hospitality Sector Voices Alarm Over Proposed Tax Increases and Economic Challenges

As the new government settles in, many in the hospitality sector are expressing concern over proposed increases in National Insurance contributions for employers and potential changes to tax thresholds and living wage increases. Operators across the industry are sounding alarm bells, fearing these measures could exacerbate the already precarious situation facing many businesses.

The hospitality industry is currently grappling with a wave of closures, with establishments shutting down weekly due to financial pressures. Despite steady turnover for many operators in Liverpool and throughout the UK, making profits has become increasingly difficult. The sector is in dire need of a comprehensive tax recalibration, especially considering that hospitality generated £54 billion in tax receipts in 2022.

In Liverpool, where hospitality is a significant part of the economy, the tourism industry was valued at £6.25 billion in 2023. Stakeholders are urging that this figure must increase annually, but the pathway to achieving that growth remains uncertain. The current climate is marked by challenges that threaten the survival of countless establishments.

“Unless the government truly listens to our concerns, we will witness more closures and job losses,” warned a local hospitality operator. “How many more fresh food-led businesses must close for the government to realize the need for policies that allow the hospitality sector to grow, invest, and survive?”

With the post-COVID support measures fading and debts still looming, the sector is facing a challenging environment marked by declining consumer confidence. The struggle is not limited to restaurants; pubs, cafes, and bars are all contending with a difficult trading landscape, presenting a perfect storm for potential failure.

The key issues hindering growth include high VAT on fresh prepared foods, the ending of business rates relief, rising energy costs, inflation in ingredient prices, increased wages, and the burden of business PAYE and National Insurance contributions. Brexit has also introduced tariffs on imported goods, compounding the challenges businesses face, while the cost of borrowing and servicing loans taken during the pandemic further strain financial resources.

Industry leaders are particularly vocal about the urgent need to recalibrate the VAT on fresh prepared foods to align with European standards, enabling businesses to invest in their operations and communities. Additionally, calls for business rates reform are growing, advocating for a level playing field between physical high street businesses and online competitors.

“Currently, the way business rates are assessed is nonsensical, especially with the impending end of business rates relief, which would be another crippling blow,” emphasized a spokesperson for the sector.

As calls for change intensify, the hospitality industry hopes the Chancellor and the government will take heed of these pressing concerns. The time for action is now, as operators strive not just to survive but to thrive in a challenging economic landscape.