Celebrity chef Tom Kerridge has renewed calls to slash VAT in hospitality, warning that 21 venues are closing every week. He said traditional chippies were a "prime example" of squeezed businesses because they have little scope to switch to alternative ingredients, so they cannot offset soaring costs.
VAT as the key lever
While hospitality faces several pressures, VAT is widely seen as the key because the Government can only control business rates in the immediate term, which "don't affect the overall success or failure of a business," he said. "The one lever, the one thing that will change for the whole of the industry, is the VAT. They know that they have the levers to encourage growth. VAT is the one thing that ties it all together and makes the difference," Kerridge told the Express.
He said the first benefit would be preventing closures, since the extra 10% of revenue would give businesses breathing room to pay bills. Growth would be a future task. At present, he stressed "really good operators" are closing because they cannot make profits, even if they are busy.
Fish and chips hit hard
"What you've got here is 21 restaurants, pubs, bars, nightclubs, shutting every single week. It's not just bad places, it's people that have been operating for years and years and years, Michelin-starred sites, seasoned professionals that have been able to make it work."
Fish and chip takeaways can be particularly exposed because their menus are built around a handful of soaring staple ingredients, making it harder to absorb rising costs without passing them on to customers.
"It disproportionately affects different menu items," he said. "Fish and chips is a prime example. Fish is incredibly expensive. Potatoes, they're a fresh product that are grown in fields by farmers who are affected by fertiliser, fuel prices, weather conditions. It's not a processed factory-made thing like a lot of potato starch products."
"Most importantly, the veg oil has had over 150% increase in the last four years in terms of pricing."
Industry pressure
In June, the Express revealed that 19% of chippy owners planned to leave the trade within the next 12 months, according to a survey by the National Federation of Fish Friers. NFFF president Andrew Crook said: "It is evident that things are not working as they are." He said reducing VAT would protect businesses and provide much-needed jobs for young people.
Pubs are also feeling the strain, with classic ingredients such as beef and cooking oil rising by more than 100% over the past four years.
"Those price increases are massive, your staple things have gone up. The restaurants and the spaces may not be passing on those costs because if you suddenly double the price on a steak, a burger or chips to just cover the cost, you've priced yourself out of the market. So you've got to be hopeful that people come for other things."
He believes VAT would also help offset "massive" utility bills, rising National Insurance and minimum wage, and expensive business rates. The reason campaigners aren't focusing on food and energy inflation is because "it's not something that's solvable overnight, and inflation is a much bigger and broader picture".
Support and warnings
Plus, Kerridge supports higher wages to reinforce hospitality as a long-term career, though some believe minimum wage has made untrained youngsters unemployable, now £12.71 for those aged 21 and over.
He also warned Andy Burnham's 20% business rate cut for pubs, clubs and live music venues is "nowhere near enough, and it won't save hospitality", with a typical saving estimated at around £1,100 next year. Restaurants and hotels were left out. However, Kerridge believes it is a positive sign that hospitality was a "priority conversation" at the beginning of the new PM's term. The chef said he has been in talks with Burnham about VAT, "with an understanding of further conversations to be made".
More than 300,000 people are behind the VAT campaign, including huge brands such as Wetherspoons. Boss Tim Martin described it as a "perverse" set-up that made pubs lose approximately 50% of their beer trade to supermarkets since 2000, because they pay zero VAT.
So what will happen if nothing changes? Kerridge bleakly replied: "21 spaces continue closing every single week until it dies".
