Rise in VAT will mean higher prices, businesses warn

04 Apr 2022

Businesses have warned that the recent rise in VAT will increase prices for customers.

From 1 April VAT increased from 12.5% to 20%. Businesses in the hospitality and tourism sector warned that they are facing 'soaring costs', including rising costs for food and energy.

Advisory body UK Hospitality said that the rise in VAT will result in 'double-digit price increases for consumers as operators struggle to survive'. Kate Nicholls, CEO of UK Hospitality, said: 'Given the unfolding cost-of-living crisis for consumers and soaring operating costs for businesses, the return to 20% VAT for the sector will prove nothing less than catastrophic.

'The now inevitable price rises for consumers will dampen demand and many hospitality businesses – one in three having less than a month of cash reserves and most are carrying heavy debt burdens – will fail as a result. This can only cause the UK's wider economic recovery to falter.'

However, the Treasury stated that the lower VAT rate of 12.5% was temporary to support businesses in industries most affected by the coronavirus (COVID-19) pandemic.