The national VAT reduction - a hindrance or a help?

22 July, 2020
Alex Demetriou

Following the implementation of the reduced VAT in leisure and hospitality, there is a distinct split between operator’s opinions as to whether it should be passed directly onto customers.

Brewdog were the first to announce via social media that they will be passing on all the savings to their customers. More national brands such as Nandos and Costa Coffee have followed suit.

Creating more confusion in the market are Wetherspoons who have taken the 15% VAT saving on soft drinks and food and blended it across all their product lines, including beer. Some operators are concerned that this message from Tim Martin will confuse customers who may then be expecting independent pubs to reduce pricing on alcoholic drinks, despite the VAT on these products remaining at 20%.

Whilst national brands seem keen to pass the saving on, there is a very different feeling in the independently owned businesses who need the VAT saving to ensure survival.

Many of our Regency members have faced a challenging time trying to keep staff employed, preparing their venues to be Covid Safe, operating at reduced capacity and they do not believe they will survive to the end of the year without the VAT saving hitting their bottom line.

A number of independents have been critical of the larger brands; particularly Tim Martin who has been very vocal about the price cuts, but there is another angle.

When the time comes for the Government to increase the VAT in the leisure and hospitality industries, the hope has to be that the same nationwide chains will be equally as vocal in having to put their prices back up. This will be seen by consumers as a direct tax on them and will almost certainly make the Government think twice before they bring the VAT level back to 20%.

The medium to long term hope is that the Governments plans to maintain a level of VAT disparity within our market. Unlike our colleagues in the retail industry we produce food and an experience. To create that food and experience we need staff. We are contributing by way of PAYE and pension contribution on a greater scale than retailers who are currently still paying 20% VAT.

So whilst as independent operators our initial thoughts were to be disgruntled at the larger brands for putting us under pressure and having to explain to customers why there is no reduction in pricing; it could be that long term the same national brands use the leverage to pressure the Government and end up maintaining the reduced VAT level for longer and at that point, we independents may be a little more grateful for the nationals throwing their weight around.

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