£270 million budget hangover hits Scottish hospitality

UKHospitality Scotland Executive Director Leon Thompson

THE Scottish Government’s failure to offer any meaningful support to businesses in its Budget, alongside a lack of action in Westminster, means that the financial investment needed to deliver growth in the industry is at risk.

Increases to the National Minimum Wage and National Living Wage will see Scottish hospitality’s wage bill increase by £254m. As a sector reliant on its workforce, employment costs make up over half of operating costs.

Increases to Intermediate and Higher Property Rate represent a further £17m in business rates. The tax on property heavily penalises community-based businesses, like hospitality.

After a collective failure to act in Holyrood and Westminster, UKHospitality is calling on both governments to rebalance the costs that hospitality businesses pay and reduce its financial burden so they can make the investments needed to grow, create communities in which people want to live, work and invest.

The three quickest levers governments can pull:

  • Fix business rates – The Scottish Government must make good on its pledge to reform business rates. UKHospitality Scotland is calling for a permanently reduced business rates poundage for hospitality, leisure and high-street retail sectors at a rate of 30 pence in the pound.
  • Employment costs – support businesses to introduce the record increase in the National Living Wage by temporarily reducing the rate of employer National Insurance Contributions, while setting a sustainable long-term mandate for the Low Pay Commission.
  • VAT – reduce the rate of VAT on hospitality, leisure and tourism to 12.5%, returning to the effective policy during the pandemic and matching the average of our continental competitors.

Leon Thompson, Executive Director of UKHospitality Scotland, said: “Hospitality serves Scotland in so many ways. Not only does it provide fantastic food, drink and experiences, but it contributes almost £8 billion to the Scottish economy, employs nearly 300,000 people and is one of the main attractions for visitors.

“All of that is put at risk with the £270 million Budget hangover hitting hospitality today. This isn’t money that businesses can easily find – they’re having to divert cash away from investment and into paying the bills.

“Everyone in hospitality supports paying their staff a fair wage that reflects their importance to what we do. But we need healthy and profitable businesses to do that, supported by regulation that doesn’t penalise a community-based sector.

“The Scottish Government had the chance to ease that pain through business rates relief at the Scottish Budget, but it passed on that opportunity.

“There are still levers that Holyrood and Westminster can pull to help businesses in Scotland.

“The Scottish Government should use new funds from the Spring Budget to fund business rates support and it should continue, at pace, with recommendations to reform business rates, and in Westminster they can ease employment costs and reduce VAT. I would urge them to pull those levers quickly.”

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