In a survey of more than a thousand hospitality and tourism businesses carried out by the Cut Tourism VAT (CTV) Campaign, UK Hospitality, the Tourism Alliance and the Association of Leading Visitor Attractions, 90% of respondents said the VAT cut was either important, very important, or crucial to their business.
More than 75% said they might not be able to trade without it.
Most businesses have used some of the VAT reduction, which was introduced in July last year and saw the standard rate of VAT cut from 20% to 5%, to meet the additional costs of Covid compliance, with the paying of wages and suppliers also cited.
The survey shows that if the VAT rate reverts back to 20% in April 2021, there will be further cut-backs and job losses and the CTV Campaign estimates that this could mean the loss of 310,000 jobs in hospitality and tourism.
If the cut were to continue beyond March, CTV says turnover in the sector would be up to £9bn greater than without the extension.
Respondents were also asked to comment on how their attitude to investment might change if VAT were to be 5% indefinitely and over 80% did so, with nearly all comments indicating a very strong positive impact on confidence and investment and 72% of businesses said that they would use some of the reduction to fund investment.
Kurt Janson, director of the Tourism Alliance, says the temporary reduction has been 'vital' in protecting businesses, suppliers and employment, and returning to a 20% rate would 'undo all that good work'.
"We believe that there is also a huge benefit in combining a reduction in VAT for the tourism and hospitality industry with a reduction in the VAT threshold for businesses,” he adds.
CTV points out that since the survey was conducted in a narrow window in December, things have got even worse with takings in restaurants, pubs and bars slumping by almost 80% between Christmas Eve and Boxing Day.
With an effective lockdown now in place across the country for the foreseeable future, it says the hospitality and tourism sector is united in its demand for continued financial support.
“Hospitality has been devastated by the Covid crisis that has impacted so many of our lives and livelihoods,” says Kate Nicholls, chief executive of UKHospitality.
“The decision of the Chancellor to cut VAT to 5% last July was one of the few bright spots of the year and stimulated economic growth before the second wave began to hit.
“If the Government wants to see a turbo-charged recovery in communities right across the UK then an extension of the VAT cut is the surest way to do it – creating jobs, investment in our high streets and helping customers get a cheaper hospitality experience.”