Home Business News Chancellor urged to reduce VAT to 12.5% with many Night Time Economy businesses barely breaking even

Chancellor urged to reduce VAT to 12.5% with many Night Time Economy businesses barely breaking even

by LLB Finance Reporter
4th Jul 22 1:12 pm

Despite the removal of restrictions on our ability to operate, and limited financial relief for businesses from the Chancellor in response to cost inflation, these sectors are still in a very fragile state.

There is a temptation to think that, because restrictions have now been removed, the sector will simply snap back to its pre-pandemic strength.

But sadly given the additional cost inflation pressures this is a long way from the truth, and many businesses – who are already burdened with significant debt hangovers from the pandemic – are now facing huge pressures from the wider economic landscape.

Following extensive research carried out by the Night Time Industries Association (NTIA) into over 200 businesses within the Night Time Economy, 53.2% of respondents are seeing a 30% increase in operating costs compared to pre-pandemic levels.

The research discovered that 48% of respondents are ‘barely breaking even’ when asked if their business is still profitable based on the increase of trade cost, with a further 20.2% stating that they’re losing money.

Whilst 44.7% of respondents are “unsure” if their business will survive the next 12 months, with an additional 20.8% stating they are “not confident.”

Those who have renewed both Gas & Electricity contracts in the last 4 month have seen a 37% Increase in Energy Costs, with contract renewals in Electric seeing up to 54% increase and Gas contracts seeing up to 151% increase for businesses.

With 36.5% of respondents say their weekly sales have dropped by 30% in comparison to pre pandemic trade levels, A further 15.5% of respondents have experienced up to a 50% loss in that period and on average were still carrying £133,957 worth of Supplier and Bank/Loan Debt.

The truth is that this bleak picture means that businesses in our sector are being forced to pass on rising costs to consumers in a bid to stay afloat, with some circumstances meaning that business owners cannot continue with jobs being lost day by day.

This will add to wider inflationary pressures in the economy, and has left the Night Time Economy sector particularly exposed with the cost of living rising, inflation at 9.1% – things like a night out are likely to be among the first things consumers cut down on in their efforts to ensure they can pay their own bills.

These are good businesses that will be viable if we can put measures in place to control inflation. It would be such a shame if many were to fall at the final hurdle of this national crisis.

Michael Kill CEO NTIA said, “Time is running out for the Government and the Chancellor to put measures in place to stem the spiraling costs of living, with inflation reaching 9.1%.

“Hospitality, night time economy and events industries are facing a bleak summer, and uncertainty to what the future holds with no clear strategy presented by the Prime Minister on when or how this crisis will be averted.

“Businesses are struggling to meet operating costs, in many cases barely breaking even, with staff and customers starting to feel the impact of cost of living.

“We need decisive action from the Government, with the industry calling for an immediate reduction in VAT to 12.5% across the board, with an extension of business rates relief and an energy cap for small medium enterprise businesses.”

Sacha Lord, Night Time Economy Adviser for Greater Manchester, and Chair of the Board of Directors at the NTIA, said, “The combined, unrelenting pressures of rising supply costs, energy increases and historic pandemic debt burdens are taking their toll on operators across the hospitality and events sector.

“Having barely recovered from the upheaval of the past two years, they find themselves once again in an uphill battle which, to many, will be simply unsustainable.

“I echo the NTIA and others in industry in calling on the government to implement a temporary reduction in VAT for the hospitality, late night economy and events sector, in order to save the livelihoods of the hundreds of thousands of staff across the UK that the sector employs.

“I continue to urge the Chancellor to show greater willingness and support the small and independent businesses across the UK who are the backbone of our economy.”

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