Rising Costs and Calls for Relief in UK Hospitality Sector
Hotels and other hospitality businesses located in some of the most picturesque parts of Britain are increasingly struggling to stay afloat due to soaring fuel oil costs. These businesses are now appealing to government ministers to reduce taxes and green levies, which they claim are pushing them toward bankruptcy.
UK Hospitality, a trade body representing the sector, has written to Chancellor Rachel Reeves, urging her to halve the VAT rate affecting the industry from 20% to 10%. Additionally, the group is calling for the removal of a planned tourist tax on visitors, which it believes could help revive the struggling hospitality sector.
Business owners in remote areas are also facing challenges due to a sharp increase in the price of bottled gas, following the outbreak of conflict in Iran. These business operators are urging the government to eliminate green levies on fossil fuels to reduce their energy bills.
Charles Bowman, a hotelier who manages a Grade II-listed property in the Forest of Bowland, Lancashire, expressed concerns about the financial strain on small businesses. He told The Mail on Sunday that the rising costs "could mean the difference between survival and not for some businesses."
Bowman and his wife Louise, who run the 25-bedroom Inn At Whitewell, employ 98 people. They described the current situation as a "stranglehold," saying they have had to absorb many of the additional taxes to avoid increasing room rates or meal prices. This move is aimed at keeping customers coming despite the economic pressures.
The Inn At Whitewell faces unique challenges. It has been denied permission to install solar panels, is located in a valley unsuitable for wind turbines, and lacks an electricity connection powerful enough for heat pumps. As a result, the hotel relies entirely on oil and gas for power.
The ongoing conflict in Iran has caused heating oil prices to skyrocket. In January, the price was 65p per litre, but by early March, it reached as high as £1.30 per litre. Although the price has since dropped to around 90p, it remains significantly higher than before the crisis. LPG costs have also increased sharply, even before the war began. Data shows that refill charges for 47kg industrial-size butane canisters rose from approximately £95 to £126 between December and March—a 26% increase. However, prices have since fallen back below £100 this month.
Margaret Major, managing editor of the Fuel Oil News trade publication, noted that while only 7% of UK businesses use bottled gas, this figure rises to 17% in rural counties. She emphasized that small and medium-sized businesses in remote areas are particularly vulnerable to these price increases.
As supply costs continue to rise, so does the government’s 20% VAT on both fuel types, which is passed on to consumers. The climate change levy is also added to the cost of each litre of LPG, and fuel duty must be paid on heating oil.
Sarah Chapman-Hughes, who runs the 11-bedroom Mortal Man hotel in Troutbeck, Lake District, said she is making “zero” profit and is calling for the removal of green taxes on her LPG bills. She criticized the climate change levy as a “joke,” stating, “Can anyone in Government say they care about the climate? Probably not, otherwise they would have got on with developing different sources of power.”
Chapman-Hughes expects her LPG costs to soar to £3,500 a month from the autumn. She explained, “We don't have a choice because of where we are located.”
Gary Shorrock, who co-owns The Old Post Office tearoom in Troutbeck with his wife Jane, echoed similar concerns. He said rural hospitality businesses are being “unfairly targeted” simply because of their location. He noted that fuel oil prices averaged 65p per litre before rising to £1.31 when the war started, although they have since fallen back. However, he stressed that the government should have acted immediately to reduce VAT.
For small businesses in hospitality, the challenges are immense. Shorrock mentioned that they have two full-time and two part-time staff, but his wife has been working 14-hour days to keep the business running.
Allen Simpson, chief executive of UK Hospitality, recently wrote to the Chancellor, highlighting the “extreme cost pressures” the sector is facing. He called for intervention to prevent viable businesses from being lost.
The industry body has requested targeted support, including a VAT cut, extending business rate discounts currently given to pubs to the rest of the sector, and relief on “non-commodity” charges on energy bills.
A Treasury spokesperson responded by stating, “We have the right economic plan – we're reforming business rates to back hospitality, with a £4.3 billion support package to limit bill rises, alongside capping corporation tax at 25 per cent, cutting red tape and taking action on the cost of living to boost the sector.”
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