Manchester’s night time economy tsar Sasha Lord has voiced concerns over the state of the hospitality industry ahead of the chancellor’s Rishi Sunak’s Spring Statement. Many in the restaurant and bar business have expressed fears that when VAT increases back to pre-pandemic levels next month it could spell disaster for their businesses.
“I am concerned for the North. At a time when we are supposed to be levelling up, we are only seeing the divide between rich and poor widen,” said Lord.
"The Chancellor says tax increases are needed now in order to calm future fiscal problems, but while this long term view is commendable, it is critically short sighted when so many are suffering financially today, and having to make choices on whether to spend their wages on food or heating.
"The hospitality sector is well known for employing college leavers or those needing flexible careers in order to care for children or elderly parents, and it is a vital employer in some of the most deprived areas of our region.”
Though it’s thought that Sunak will introduce some measures to ease the pressure, like cutting fuel duty, some, like former cabinet minister John Redwood have said that the action will be ‘too little, too late’.
The planned increase in National Insurance contributions is also likely to go through, despite calls for the 1.25% hike to be at least postponed while households in the UK face unprecedented rises in cost of living and sky-rocketing energy prices.
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But it’s thought that Sunak may decide to move the threshold, so that lower-paid workers - those earning less than £27,500 - won’t be included in the plans.
Consumer finance expert Martin Lewis has also said that the UK is facing ‘an absolute poverty crisis’.
"Our industry needs to stay afloat in order to keep providing these work opportunities and I fear for the survival of many businesses,” Lord went on. “Pubs and restaurants are seeing difficulties across the board, from tax hikes, inflated price rises for produce and ingredients and surging energy costs, on top of existing covid debt.
"The planned VAT increase from 12.5% to 20% from April will only exacerbate the perilous financial position many businesses find themselves in. I urge the Chancellor to reconsider an extension to the current rate to stave off closures across the sector and the loss of thousands of jobs.”
Speaking to the Manchester Evening News, David Fox, owner of the Tampopo chain, said: "The lower VAT on food and non-alcoholic drinks is still higher than 0% VAT on the same products in supermarkets. Going up to 20% will be part of massive cost pressures on the industry including a 7.25% increase in many wages, so national minimum wage and national insurance, utility prices as much as trebling or quadrupling, food prices increasing above inflation.
"The price of my chicken has increased by 15% as a direct result of the Ukraine war where most of the wheat comes from to feed chickens and other general inflation increases. I estimate for my business we would need to put our prices up by nearly 10% in order just to stand still.
"This is at a time when most consumers are feeling the pinch in terms of their other spend, like petrol prices food and drink costs, national insurance increases. The term out of the frying pan into the fire springs to mind. There will be definitely more casualties in hospitality as many businesses will not be able to offset these costs."
It comes after some of Manchester's leading breweries told the Manchester Evening News that some are surviving by the ' skin of their teeth ' due to increasing costs in almost every part of their businesses.
Sunak will deliver his Spring Statement to the House of Commons on Wednesday (March 23).
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