I was recently invited by hospitality customers of Caber Coffee’s, alongside a broad selection of other cafes, restaurants, fish and chip shops and more, to meet with Andrew Bowie MP to ask for help as business owners desperately search for ways to survive in an ever-more challenging marketplace.
January saw another spate of closures in Aberdeen alone and this feels like the start of a tsunami. Why? Because in a sector that has, for a long time, struggled to be profitable, the latest minimum wage and NIC increases leave virtually no net profit.
From raw ingredients to energy and rates, the North East hospitality trade is being bled dry. The sector has always been disproportionately and unfairly penalised by VAT rules, but the precedent set post-COVID, and by many other European countries, of implementing a specific VAT rate for hospitality, could be actioned immediately.
VAT is such a specific issue for hospitality because, unlike most other industries, many hospitality businesses take zero-VAT rateable raw ingredients and convert them into full VAT-qualifying meals. That toastie you ate at lunchtime in your favourite cafe? There’s no VAT on the purchase of the bread or cheese, but in the process of heating it up it becomes VAT qualifying to the tune of 20%. It is “the Toastie Tax” as Andrew described it.
To be clear, the sector isn’t asking to contribute nothing: they’re simply asking to be treated fairly. Besides, there will be even less VAT pouring in to the Treasury if the whole sector implodes, and that’s before you even get to the job losses and costs to the economy of supporting those out of work.
Worse still, it is impossible for hospitality businesses to escape: if ingredient or staff costs rise, as they have, prices need to go up. If you increase your prices, you need to keep more cash aside to pay the VAT bill every quarter – just imagine having to park one fifth of your business sales revenue just to send it all away four times a year, and yet, that’s exactly what this industry does for the Treasury. Someone I know even described himself as feeling like a tax collector.
I anticipate a lot more noise around this issue in the coming weeks and months, and I implore you to listen be sympathetic and add your support when you see petitions online. The affected businesses provide us with so much. They can be a refuge, a safe haven, great food, that warming coffee, a sweet treat all lovingly prepared and served.
Every one of the businesses who spoke to Andrew Bowie MP has a passionate owner, someone whose dream is becoming a nightmare as they take more upon themselves, just to make ends meet.
Many of us started our careers working in hospitality in some way, waiting tables whilst still at school, or a part-time bar job whilst studying – these roles sit among the low-cost labour that props us the hospitality sector more than any other I can think of. In my teens I was a function waiter, staff at the old airport restaurant and latterly a barman. Many of us will have fond memories of working in the sector but as things stand, those opportunities for our children, are hanging in the balance.
So why am I so passionate about supporting this cause, and urging others to do the same? Simply, as I said to those around me at that meeting, because their success is our success. The supply chain is as reliant upon these fantastic businesses as they are upon your custom through their doors.
We need to spell it out, loud and clear, that politicians and decision makers can’t have their cake and eat it: very soon they might not even get cake.
To find out more, visit www.cabercoffee.com email info@cabercoffee.com or call 0845 302 4600.