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21.10.2014

Is a VAT cut on food and drink needed?

We saw this article on VAT on food and drink recently in City AM:Pub food

http://www.cityam.com/1410504462/jd-wetherspoon-reports-record-profit-boss-slams-vat

It got us thinking!

There is certainly some truth in the statement that VAT impacts on a business, but does it really give pubs and restaurants a “serious economic disadvantage” against supermarkets?
Key players in the industry are now actively campaigning for a VAT reduction on food and drink which it is thought would generate growth and more jobs:

http://news.sky.com/story/1341071/pubs-and-bars-slash-prices-in-vat-cut-campaign

We’re not entirely convinced though.

Certainly the economic environment of recent years hasn’t helped the casual dining and entertainment industry.   Disposable income for many potential customers has been restricted.  This has had significantly more impact on businesses than VAT, which in essence hasn’t changed in recent years.  You cannot underestimate the importance of cash management and careful pricing systems in managing the impact of VAT on any business, including pubs and restaurants.  Working with clients in this sector we have helped manage these areas with great success.  We have utilised key sector specific KPIs along the way to benchmark our clients against competitors in an attempt to find that competitive edge that will make the difference.

The income splitIf every business hid behind VAT being a barrier to success we’d be in a world of international corporate bodies with little competition, and that wouldn’t be good for anybody!
As for the technicalities of VAT on food well, that’s a whole other topic of conversation!

If you want to tap into our insight on this industry and what tools and systems you can implement to grow your business (despite the VAT regime!) then get in touch.

We would also love to hear your thoughts.
Would a reduction in prices due to a VAT rate cut increase your spending in pubs and restaurants?
Are you a business owner in this industry?  Would you even pass the VAT cut onto consumers or simply freeze prices and channel additional profits into growth?

Please leave your comments below…

 

CNM Advisory