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VAT cut from 20% to 5% on food, accommodation and attractions ‘game changer’ for hospitality industry

The Chancellor also offered fresh incentives to employers in terms of retaining furloughed staff and creating further job opportunities

Rishi Sunak

Politicians and business sector have welcomed plans to cut the level of VAT on food, accommodation and attractions from 20% to 5% as part of a wider recovery plan.

Chancellor Rishi Sunak’s summer statement on Wednesday also offered fresh incentives to employers in terms of retaining furloughed staff and creating further opportunities.

DUP Upper Bann MP Carla Lockhart said the series of announcements by the Chancellor will help to stimulate the economy and the jobs market over the next few months.

Each business that retains employees has the potential to claim £1000 per employee retained.

As a further measure the Chancellor stated the Government will pay the first six months of wages up to a £6,500 for employers who will create jobs for 16-24 year olds, and £2,000 for apprentices under 25 alongside £1,500 for those over 25.

Tying in with this to stimulate the housing market, is a removal of stamp duty for properties under £500,000.

As a means of boosting the tourism and hospitality sectors from July 15, VAT will be reduced to 5% for services supplied and for the month of August a 50% reduction, up to £10 per head, on sit down meals and non alcoholic drinks Monday to Wednesday.

Speaking after the announcement, Carla Lockhart said, “There will undoubtedly be challenging times ahead for many businesses but there are great incentives for businesses to retain staff and increase headcount with apprentices and trainees.

“This is a fantastic scheme to boost the job market and give some peace of mind to employers, employees and young people leaving school or college.

“I know that all businesses across Northern Ireland and the wider UK will welcome this input from our Government.

“They have consistently led on packages to help, but there is still more that can be done.

“As I stated last night in the House of Commons, there are some businesses who missed out on all of the schemes brought forward. The final piece of this jigsaw is ensuring everyone gets a level playing field and the support they need.”

Northern Ireland Hotels Federation (NIHF) CEO Janice Gault said is “applauds” the measures announced today to support the tourism and hospitality sector.

She hailed it as a “real game changer for the industry” and one which will “increase our chances of survival”.

Said Ms Gault: “Having campaigned for more than a decade, the news of a cut in VAT on food, accommodation and attractions from 20% to 5% until 12 January is a tremendous result for the sector, under the chancellor’s plans to kickstart the economy.

“It will allow us as an industry to compete on an all island basis and it also helps hoteliers address a number of challenges as they return to trading.

“Other measures including funding for eating out in the form of an ‘Eat Out to Help Out’ discount, in addition to further furlough support and subventions for employees are a recognition of the sector as an economic driver and a job rich sector.

“Throughout the crisis the Chancellor has trod a brave path showing ingenuity and creativity in his support mechanisms.

“Hoteliers have opened with a willingness to trade and have shown their commitment to the local economy in doing so.

“This latest development will create a sustained positive impression on the economy and shows that the hospitality sector is positioned as an engine for growth.”

Ann McGregor, Chief Executive of Northern Ireland Chamber of Commerce and Industry, welcomed the news but said it was “likely that the scale of the stimulus needed to help the economy recover will need to be greater still over the coming months”.

She added: “We now look to the NI Executive for clarity on how it plans to use the Barnett consequential revenues in Northern Ireland.

“We look forward to seeing the detail of the job retention bonus to help safeguard jobs for some furloughed staff, but the best way to protect jobs is to reduce the overall cost of employment. Ministers must therefore consider a cut in employer national insurance contributions in the coming months.

“The VAT cut will help firms in the hospitality and tourism sectors working hard to restart after many months of lost revenue.

“Over the coming weeks the Chancellor will also need to address a number of other key concerns – most importantly the impending end of key business loan schemes.

“Northern Ireland’s corporate indebtedness has risen as a result and it is critical that Government, banks and regulators work together with business communities to find solutions that help viable businesses recover and invest.

“NI Chamber has already suggested a Westminster-funded ‘Business Revival Fund’ that firms can use in any way they need to increase productivity to deal with the fall out of the COVID-19 crisis – may that be to help them change their products/services, invest in new markets or introduce more sustainable practices for example.”

Tourism NI’s Chief Executive John McGrillen described the Chancellor’s announcements as a “great boost for tourism and hospitality businesses across Northern Ireland”.

He said: “The reduction in VAT from 20% to 5% for six months will give a lifeline to businesses as they re-open and continue to trade in very challenging circumstances.

“The Eat Out to Help Out scheme is also a very welcome intervention for the hospitality sector which contributes so much to the visitor experience.

“Taken together these measures will help to stimulate demand, encourage more people to take a break at home this summer and save local jobs.”

The Federation of Small Business’s Head of External Affairs, Roger Pollen, has welcomed many of the measures brought forward, but has also said that it is vital that Northern Ireland actually sees the benefit of the investment in skills.

He added: “Many of the measures brought forward by the Chancellor today are very welcome and correspond with the ‘jobs first’ approach which FSB has been advocating in the run up to today’s statement.

“The six months VAT cut on food, accommodation and attractions from 20 per cent to five per cent will give a much-needed boost to those sectors that have been hardest hit by the Covid-19 crisis, while the ‘Eat-out to Help out’ discount vouchers will help drive footfall to hospitality businesses.

“The £1,000 Job Retention Bonus for employers will also encourage businesses to bring back furloughed workers and could help avoid redundancies.

“However, many of the other measures announced today apply to either England or Great Britain only, and it is up to the Northern Ireland Executive to decide how best to utilise the funding which emanates from Barnett Consequentials to achieve the same sort of economic benefits here.

“Just as the Chancellor has invested significantly via the ‘Kickstart Scheme’, the Executive should similarly invest in skills and apprenticeships.

“With SMEs in Northern Ireland employing more people than all larger businesses and the entire public sector combined, small businesses will be well placed to benefit from the next generation of skilled workers, as part of a talent-led recovery.

“The onus is now on Stormont Ministers to step up to the mark to design schemes which encourages skills and training, and are able to be accessed by all businesses – large and small alike.”

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