The directors of 4U2U Group have called upon East Hampshire MP Damian Hinds and the government to act on what they fear may be a growing jobs crisis in the local hospitality industry when the VAT rate returns to pre-pandemic levels for all hospitality sector businesses.
The temporary-reduced VAT rate of 12.5 per cent was introduced by the government in March 2021, extended in September 2021 and ends tomorrow (April 1) – at which point the 20 per cent flat rate on many of the products for sale by restaurants, takeaways and deliveries is reinstated.
4U2U Group managing director Dayne Cartwright said: “While we have planned for the change, we feel the sector is still in recovery and this rise is an issue that affects all hospitality businesses.
“We’ve written to Mr Hinds as we need urgent action to support all local hospitality businesses facing a major hike in VAT to pre-pandemic levels right at the time when the economy appears to be slowing down and inflation is on the rise.
“Add to that a global fuel crisis, and energy prices set to soar even higher and the outlook is very grim indeed.”
The group employs more than 50 local residents.
Mr Cartwright warns further employment opportunities may be limited as costs to businesses and households increase in the growing cost of living crisis.
Mr Cartwright is supported by his fellow board members Stuart Morrison and Andy Tree.
They said: “It’s absolutely vital for all jobs in the area to have a strong local economy as we fight our way out of the pandemic.
“To support that and retain local jobs, we need the government to act and keep VAT locked at 12.5 per cent if the hospitality industry is to stabilise and weather the leaner times economists have warned about.
“We were extremely disappointed Rishi Sunak’s spring budget statement didn’t go further with support for all small businesses – it was a non-event.”
The letter the group wrote to Mr Hinds is below – and up to now, no response had been received by the MP.
Dear Mr Hinds,
Our growing hospitality group operates several restaurants within the Whitehill & Bordon regeneration project. We have grown our team from just a husband and wife to an operation employing over 50 local residents.
While we’ve enjoyed rapid growth, we’re extremely aware of the tough trading conditions ahead as we face significant and increasing cost pressures.
The current biggest challenge we face as a business is the proposed increase in the sector’s VAT rate. The reduced 12.5 per cent rate has been critical to us being able to absorb the cost hikes we have faced, and allowed us to continue to offer jobs to 50 local residents.
Without that reduction in VAT it is impossible to see how we can absorb the next round of costs and therefore our prices will have to increase significantly, threatening future employment opportunities and the regeneration of our amazing town.
Analysis from our trade body, UKHospitality, suggests the sector will see price inflation of over five per cent from April – with no change to the VAT rate. Increasing VAT will lead to price inflation of 12.4 per cent, compounding other supply chain cost pressures.
This will inevitably feed into the increased cost of living that people are facing. People will be faced with the choice of paying much higher prices or cutting back on their social lives.
After two years of restricted socialising, it would seem to further penalise local customers who will end up missing out on their favourite experiences when the nation’s morale is at a low ebb.
When customers’ disposable income is squeezed, we know this impacts discretionary spend and we risk seeing a broader impact on our high streets and through our communities.
In our constituency, an increase in VAT at this point in time will bring a blow to the regeneration of Whitehill and Bordon, I’m sure this is especially important to you to ensure the investment in the town continues to boost the local economy successfully.
MD 4U2U Groups Ltd