At the beginning of October, the hospitality industry was hit with a double whammy of fresh challenges. Not only was the furlough scheme ended, removing government financial support for businesses that still had furloughed staff, but the VAT rate for the industry also increased to 12.5%.
Back towards the beginning of the pandemic, the Chancellor reduced the VAT rate for hospitality to just 5%, from 20%. This was a welcome move, intended to try to reduce the burden on an industry that would clearly struggle through the following months. Now, after more than a year at 5%, the government is beginning the process of returning the VAT rate to pre-pandemic levels, first by upping it to 12.5%.
Although hotel, restaurant, pub and cafe owners will feel the effects of this increase on their bottom lines, it’s customers who will feel the impact in their wallets. There’s already major pressure on prices with supply chain and staffing issues continuing to stretch businesses to the limits. Now, with the rate of VAT jumping suddenly up to 12.5%, many business owners will have to change their pricing yet again.
How will the VAT increase impact you?
Trade bodies representing the hospitality industry claim that restaurateurs, cafe and pub owners across the country are already struggling to survive, let alone recover, from the pandemic. To say the VAT increase and the ensuing price rises that are bound to follow, are poorly timed is an understatement.
Then there’s the expected further rise to 20% planned for April 2022. This will no doubt lead to further price increases for business owners to navigate.
Now, major trade associations representing businesses in the hospitality industry are calling for the rate to stay at 12.5% permanently, instead of rising to 20% in spring next year. A joint statement by trade bodies including UKHospitality, the British Institute of Innkeeping and the British Beer and Pub Association, said:
“A reduction in VAT has helped many of our businesses survive to this point and was most welcome. However, the return of VAT to its pre-pandemic level next year would curtail investment, restrict growth, set back our tourism recovery and risk yet more painful job losses.”
How to take the sting out of VAT rises?
Here at Leslie, we know that business owners will be looking for solutions to these challenges, rather than dwelling on the problems themselves. After all, you’ll have to open tomorrow, just like any other day, and there are a million jobs to do.
One job Leslie customers won’t have to do is reprint their menus every time there’s a price change. Leslie’s menu app technology makes it easy for you to change your menu whenever you need to. From the smallest adjustment, when you sell out of kids’ apple juice, to the biggest changes, like adding an extra 5% to all prices, these changes can be made through Leslie and will appear on your digital menus straight away. No reprints, no redesigns, no panic. Just complete flexibility to adapt to challenges as they come your way.
As well as making life easier with an ordering app, you can also try to reduce the need for price increases by boosting your income in other ways. Here are some quick ideas:
- Focus on increasing average diner spend through initiatives like drinks promotions, upselling (also easier through Leslie), set menus during quiet periods and better training for waiting staff.
- Invest time and money in online marketing and up your social media output to try to bring more customers through your doors.
- Consider holding events, such as theme nights, live music, quizzes, pop-ups/guest chefs and cocktail evenings. Adapting is surviving, so why not offer something new for your customers?
It’s a really difficult time for hospitality owners and managers right now. We know you just want to offer great prices and great service to as many happy customers as possible. But it feels like there’s just a never-ending stream of obstacles in your way.
For most, prices will have to increase in response to the VAT rise, supply issues and staff shortages. But at least, with Leslie, you can do this quickly and without extra cost or hassle.