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Research shows VAT cut could plough billions into the hospitality sector

14th November 2016

Research from commercial insurer NFU Mutual has found that two thirds of consumers would increase spending if a reduction in VAT is announced in the Autumn Statement.

The UK hospitality sector is particularly likely to benefit from a VAT decrease, as the research found that over half (53%) of those likely to increase some spending would spend on weekend breaks in the UK, eating out and hobbies and leisure.

A cut in VAT by 5% could provide the average UK adult with extra spending power of £547* per year. With NFU Mutual’s research showing that 67% of consumers would increase some spend as a result of VAT savings and 53% of these increasing spending on hospitality industries, British businesses in the sector could look forward to a potential cash injection of up to £10.3bn**.

Darren Seward, hospitality sector specialist at commercial insurer NFU Mutual, said: “The encouraging sign is that there is clearly an appetite for increased spending in the UK hospitality industry amongst consumers.

“With consumer spending coming under some pressure from rising inflation, the Chancellor’s decision to ‘reset’ fiscal policy could possibly include the option of cutting VAT by as much as 5% to support growth. Our research suggests that even in a more probable situation of a 1% cut, up to £2.1bn*** could be ploughed into British hospitality sector businesses. With other announcements such as increased infrastructure spending seen as more likely, whether this opportunity can be delivered to customers and benefit UK businesses remains to be seen.

18-24 year olds are the age group most likely to spend in general (78%), with 44% stating that the extra money would most likely be spent on UK weekend breaks, eating out and hobbies and leisure.

Darren Seward continued: “There is however no guarantee that the spending power of consumers will be ploughed back into UK businesses. Our research also showed increased online spending in 24% of people, which could include spending on imported goods from around the world. While the overall Autumn Statement is expected to support growth, any boosts such as a cut in VAT could also be offset by increases in other taxes, meaning that savings aren’t necessarily felt.”

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