Interest rate rise demonstrates ‘acute need for further support' for hospitality
UKHospitality has stressed the "acute need for further support" for the hospitality industry following the latest hike in interest rates.
The Bank of England (BoE) has increased interest rates from 1.75% to 2.25%, which takes borrowing costs to their highest level since 2008.
Inflation is still at a forty-year high of 9.9%, while the war in Ukraine continues to raise prices of oil and gas.
It comes after the rise in interest rates from 1.25% to 1.75% this August, which was introduced in an effort to curb inflation.
The BoE's Monetary Policy Committee also predicted that the UK economy is now in recession, as GDP had fallen by 0.1% between July and September.
The news comes ahead of chancellor Kwasi Kwarteng's mini-budget that will likely focus on tax cuts and measures to boost the economy, due to be announced tomorrow.
Earlier this week, the government revealed that energy bills for UK businesses will be cut by roughly 50% of their expected level for the next six months, starting from 1 October.
Kate Nicholls, chief executive of UKHospitality, said: "The rise in interest rates, while widely expected, has a two-pronged negative impact on an already struggling hospitality sector. It will simultaneously diminish discretionary spend for consumers while making borrowing more expensive, exacerbating the already challenging trading environment for our businesses.
"This underlines the acute need for further support for the industry, in the form of business rates reliefs and reduced rates of VAT to spur recovery in a vital sector upon which millions of jobs depend."
Operators have long called for a permanent reduction in VAT for hospitality. Paul Askew, chef patron of the Art School, Liverpool, said: "Tomorrow is the chance to be bold and for the chancellor, Kwasi Kwarteng, to reduce VAT to 15% permanently. We need a permanent reduction of VAT to help us not only get through the coming months, but an overhaul of the entire system has to happen."
