Press

- BHA annual report says VAT is counterproductive to the prime minister’s growth objective

Tourism is the only export of the UK which is subject to domestic VAT and its current high level is clearly a deterrent to visitors and discourages ‘staycationers’, says the annual report of the British Hospitality Association, published Monday 6 June. 

“The present level of VAT in the UK is one of the most pressing issues facing the industry today, making UK tourism uncompetitive with most European competitor countries, many of which impose a lower level on accommodation (France, for example, is 5.5 per cent).

“The government’s tourism strategy does not appear to acknowledge this”.

The report says that the VAT rate is counterproductive to the prime minister’s objective of growing domestic tourism from 36 per cent to 50 per cent of total tourism spend by UK residents.

Research by Deloitte, commissioned by Bourne Leisure and Merlin Entertainments, will be used the lead the industry’s efforts in lobbying government for a reduction in the VAT rate on hotel accommodation, with a special task force chaired by tax expert, Graham Wason.

“We recognise the current difficult economic situation but the industry seeks more action on this issue than the government’s tourism strategy wants to deliver.”

The association is also producing a study detailing the potential impact of a reduced rate of VAT on the restaurant sector.

The report says that a hospitality industry task force on deregulation, chaired by Alan Parker, former chief executive of Whitbread, will be administered by the BHA.

“Its role will be to prioritise rules, regulations, inspections and forms which are holding the industry back. 

“The Department for Culture, Media and Sport has promised to work with the task force to cut, modify, or abolish as much of this red tape as possible, in collaboration with other government departments.”       

 Elsewhere in the report, the BHA urges more support for tourism from the Regional Growth Fund.

“The £29m VisitEngland bid which, if successful, would have supported the agency’s promotional efforts, was rejected.   Time is thus being lost to international competitors who will grab the opportunity to gain market share by encouraging overseas those British residents who might otherwise have holidayed at home”. 

The report also expresses concern at the loss of £60m through public expenditure cuts brought about by the progressive disbandment of Regional Development Agencies, (to be replaced by Local Enterprise Partnerships) with further reductions in the budgets of VisitBritain and VisitEngland.

“According to the government’s tourism strategy, Destination Management Organisations and LEPs are critically important to the development of domestic tourism.  However, with no transition plans or any strategic plans, the lack of tourism representation on the majority of LEP boards and the uncertainity of DMO funding, it is difficult to see how supportive LEPs will be of hospitality or tourism. 

“This is a significant risk to the industry’s potential for growth, regeneration and job creation in precisely those areas of the country where it is most needed.”

The report is available by clicking here or for a hard copy by emailing policy@bha.org.uk

For further information:

Ufi Ibrahim
Chief executive
020 7404 7744

Miles Quest
Wordsmith and Company
01753 645636
mq@wordsmith-and-co.demon.co,uk

Editor’s note:
The British Hospitality Association, incorporating the Restaurant Association, is the national trade association for the hotel, restaurant and catering industry. It has in membership almost every publicly quoted hotel group, many independent hotels, restaurants and clubs, major food and service management companies, motorway service operators and many local hospitality associations, as well as hospitality education establishments. In total, it represents more than 40,000 establishments. BHA research shows that the British hospitality industry is the UK’s fifth largest industry currently employing 2.44m and generating a further 1.2m indirect jobs.

The British Hospitality Association promotes the interests of the entire hospitality industry to government ministers, MPs and MEPs, members of the Scottish Parliament and Welsh Assembly, the EU Commission, the City and the media.