UK tourism responds to government’s VAT boost

Chancellor Rishi Sunak has cut VAT on hospitality and tourism for the next six months in a move designed to help save those sectors. Will it be enough?

Tourism trade body ABTA

But while some businesses have welcomed the move and say it could help make a difference, many in the tourism sector have warned that more help is needed. Without it, there could be further businesses closing and jobs lost, is the stark message.

Tourism trade body ABTA said the chancellor’s help didn’t go far enough.

“The summer statement showed that the government is willing and able to give tailored support to sectors in particular need, and yet there was no acknowledgement of the difficulties faced by the aviation and outbound tourism sectors,” said ABTA chief executive Mark Tanzer.

“These are not only businesses and employers in their own right, but essential parts of extended supply chains across the country.”

He warned that the aviation and outbound sectors need immediate support, adding: “We shall continue to press the government for urgent and meaningful intervention.”

Inbound tourism badly hit 

Joss Croft, chief executive of UKinbound, a trade association representing the inbound tourism industry, said the measures would not help the many businesses that are involved in inbound tourism.

“Those tourism businesses that rely wholly on international visitors for their livelihoods are on their knees and the risk of widespread redundancies and the collapse of previously successful businesses is a very real threat without further government support.”

The association’s research suggests that more than half the firms that bring overseas visitors to the UK expect to close within six months unless the government comes up with more support.

The survey found that 53% did not expect their business to last beyond the end of the year while 88% said they expected to make redundancies.

The package of measures will help the industry as it starts to rebuild and to compete for international visitors while encouraging domestic visitors to get out and enjoy the summer

Sir Patrick McLoughlin
Chair of the British Tourist Authority

“Before the pandemic, the UK was the seventh most visited country in the world but generally there is a low awareness in this country of how much international visitors contribute to our national and regional economies,” pointed out Croft.

“Sadly, we look set to see significant redundancies from tour operators and the tourism supply chain next month, which means that many communities and businesses throughout the UK who depend on significant revenue from international visitors will also suffer.”

Extend the Job Retention Scheme

One of the tourism companies struggling is Mountain Goat, which offers personalised tours in the north of England and Wales.

Owner Stephen Broughton urged the government to extend the scheme until the tourism season starts again next March.

“It would make all the difference to the survival of our business,” he said. “Our most valuable asset is our staff and we are in an area where tourism is the main source of employment. We need to do everything we can to maintain a livelihood for them.”

The cut will stimulate demand

Others felt the VAT cut, taken alongside the ‘Eat Out to Help Out’ scheme, would help UK tourism, once the UK’s borders are fully open to overseas visitors.

“The package of measures will help the industry as it starts to rebuild and to compete for international visitors while encouraging domestic visitors to get out and enjoy the summer,” said British Tourist Authority chair Sir Patrick McLoughlin.

“The key for success will be ensuring that we continue to attract domestic and international visitors through the autumn and extend the season.”

“The VAT cut will help stimulate demand and, once our borders open to incoming tourism, will also help UK tourism overall as Britain’s VAT rate has been among the highest of our international competitors,” said David Weston, chair of the Bed & Breakfast Association.

Passing on the VAT saving

The Treasury said it hoped firms would pass the VAT savings on to customers but said as many businesses had been without income for months it would be their decision whether to do so.

Rishabh Gupta, head of hotel chain OYO UK, said his hoteliers would be passing on the VAT cut.

“Our hotels are generally at the affordable end of the market and the cut gives customers who are price-sensitive or facing financial uncertainty the reassurance that they might still be able to treat themselves to a few days away,” he said.

He predicted that hotel prices will remain competitive and almost certainly below average for the rest of the year.

“Operating costs have increased because of the extra measures our hoteliers are adopting to ensure the safety and hygiene of staff,” he warned. “All savings that can be made by the business will help hoteliers stay operational while the visitor economy slowly recovers.”

He said that London hotels have been hit by lockdown but visitors are craving space and adventure.

“Lockdown has pressed a reset button for the tourism industry, so now is the time to tempt people beyond the usual tourism hotspots to discover new corners of the UK which could really use the footfall,” he said.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

scroll to top