VAT cuts won’t lower prices, say Northern Ireland hospitality leaders

The industry in Northern Ireland is making the argument that it has a special case due to direct competition with businesses in the Republic.

Michael Cadden, the chair of Hospitality Ulster, said: “We are currently victims of our geography.”

In the Republic of Ireland, hospitality VAT on food is 9% and 13.5% on accommodation.

In Northern Ireland and the rest of the UK hospitality VAT is 20%.

Mr Cadden, who runs the Lusty Beg Island Resort in Fermanagh, said that while there had always been VAT differentials the ability of Northern Ireland businesses to deal with that has been “eroded” by other cost increases.

“That’s been eroded through increases in the National Living Wage, increases in National Insurance contributions and huge increases in the supply chain,” he told the NI Affairs Committee.

Selina Horshi, Managing Director at White Horse Hotel in Londonderry, said that for every £100 of sales she is paying almost £5 in additional VAT compared to a similar business across the border.

“That quickly adds up to thousands of pounds in a business each year that we simply don’t have.”

She said it would be “disingenuous” of the industry to suggest that a VAT cut would all be passed through to lower consumer prices.

She also said that would be “funding a sale” and instead gave the example of how it would allow her to offer more competitive rates to tour operators who bring in large numbers of guests.

Demand from that sector was down in July because she could not be competitive enough on price, she added.

“If I had the ability to lower my prices to retain that, I could do a percentage of my business at that lower rate without losing the margin.”