Budget 2012: The hotel industry's reaction

By Luke Nicholls

- Last updated on GMT

A number of hotels are unhappy that Chancellor George Osborne avoided a VAT cut for the sector in his 2012 budget
A number of hotels are unhappy that Chancellor George Osborne avoided a VAT cut for the sector in his 2012 budget
While one or two measures announced in today’s budget have been welcomed by the UK hotel industry, Chancellor George Osborne has left many businesses in the dark and avoided a number of major issues hampering the sector.

That appears to be the overwhelming message of industry bodies, big businesses and individual hoteliers who all believe that, while an immediate cut in corporation tax and planned upgrade of broadband networks will benefit the sector, the Government continues to avoid the ‘elephant in the room’: VAT.

“The Chancellor said that he wanted Britain to have a tax system that is more competitive for business than any other major economy in the world, but Britain has the third highest VAT tax rate on hotel accommodation​ in Europe,” said Martin Couchman, deputy chief executive of the British Hospitality Association (BHA).

“We are continuing to compete with countries like France and Germany which charge seven per cent on hotel accommodation, Spain which charges eight per cent and Italy which charges 10 per cent. Of all the 27 EU member states, only Denmark and Lithuania charge a higher rate.”

Small business

After hearing today’s announcement of the 2012 budget, Andrew Biss, owner of the Primrose Valley hotel in St Ives, told BigHospitality: “It just seems to be more of the same for us. There is one standout thing that I would like to have seen changed in this budget: VAT. For me, it’s the elephant in the room, and if it was changed it would have a huge effect in our industry.

“I think if we’re going to kick start the industry then that’s the way to go, otherwise the Government are just playing with the edges really. But nothing’s mentioned. It doesn’t come as a surprise that the hospitality industry was left in the dark.”

Big business

Robin Sheppard is chairman of Bespoke Hotels – a collection of 50 properties across the UK, Europe, Far East and the Caribbean. Sheppard revealed his ‘disappointment’ at the Government for its neglect of the hotel industry.

He said: “I hoped there would be more tax incentive for equity injections into hotels and I had hoped that the existing Enterprise Investment Scheme​ vehicle which encourages people to invest in pubs would be extended into hotels and I can’t see any evidence of that. I think it’s a big mistake.

“Up until November, we were lead to believe that there would be strong government support for the hotel sector but since then it’s gone into reverse. I’m not surprised that this has happened, I’m just disappointed.”

Stephen McCall, managing director of InterContinental Hotels Group (IHG) for the UK and Ireland, added: “This is a huge year for tourism but we're still waiting for the Government to get behind the job-creation potential of our industry.

“With one of the highest rates of VAT on hotel accommodation in Europe, the UK shows an open for business sign but in practice the lights are off.”

Key 2012 budget announcements for the hotel sector:

  • The Chancellor announced an immediate one per cent cut in corporation tax after saying he wanted to make the UK's tax system more competitive for business than in any major economy across the world.
  • Ten major cities, including Belfast, Birmingham, Bradford, Cardiff, Leeds and London, will get money to upgrade their broadband networks. An additional £50million will be made available to smaller cities to upgrade their broadband networks as well.
  • Smaller businesses will be taxed on the amount of cash passing through their businesses rather than more complicated methods used for large companies.

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