Rising Costs Threaten Rural Hospitality Businesses in Britain
Hotels and other hospitality businesses in some of the most picturesque regions of Britain are facing a crisis as they struggle to cope with soaring fuel oil costs. Many of these establishments, especially those located in remote areas, are now urging government officials to reduce taxes and green levies to prevent them from going bankrupt.
UK Hospitality, a trade organization representing the sector, has written to Chancellor Rachel Reeves, requesting that the VAT rate for the hospitality industry be reduced from 20% to 10%. They also want the proposed tourist tax on visitors to be eliminated, which they believe would help revive the struggling sector.
Business owners in remote locations are also calling for the removal of green levies on fossil fuels. These levies have significantly increased their operating costs, making it harder for them to remain profitable.
Charles Bowman, a hotelier who runs a Grade II-listed property in the Forest of Bowland, Lancashire, has spoken out about the financial strain his business is under. He explained that the rising costs could mean the difference between staying afloat and closing down.
Bowman and his wife Louise, who employ 98 people at the 25-bedroom Inn At Whitewell, described the situation as a "stranglehold." They have been absorbing many of the extra taxes to avoid increasing room rates or meal prices, hoping to keep customers coming in.
The Inn At Whitewell is entirely reliant on oil and gas for power because it cannot install solar panels due to planning restrictions. It is also located in a valley unsuitable for wind turbines and lacks an electricity connection strong enough for heat pumps.
The Iran war has caused heating oil prices to skyrocket, rising from 65p per litre in January to as much as £1.30 per litre in early March. Although prices have since dropped to around 90p, the cost of liquefied petroleum gas (LPG) has also increased sharply, even before the conflict began.
Data shows that refill charges for 47kg industrial-size butane canisters rose from about £95 to £126 between December and March—a 26% increase. However, prices have since fallen back to below £100 this month in some areas.
Margaret Major, managing editor of Fuel Oil News, noted that while only 7% of UK businesses use bottled gas, this number rises to 17% in rural counties. This means that small and medium-sized businesses in remote areas are particularly vulnerable to price increases.
"The rural small and medium businesses will be the hardest hit by these price increases," she said. As supply costs rise, so does the Government’s 20% VAT take for both fuel types, which is passed on to customers.
In addition to VAT, the climate change levy is 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 currently making "zero" profit. She has called for the green taxes on her LPG bills to be scrapped, criticizing the climate change levy as a "joke."
"We don't have a choice because of where we are located," she said, adding that she expects LPG costs to soar to £3,500 a month from the autumn.
Gary Shorrock, who runs The Old Post Office tearoom in Troutbeck with his wife Jane, said rural hospitality businesses are being "unfairly targeted" simply because of their location.
"We use fuel oil, which averaged 65p a litre then went up to £1.31 when the war started before falling back. But the Government should have acted immediately to reduce VAT," he said.
For small businesses in hospitality, the challenges are immense. Shorrock and his wife 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, stating that the sector is facing "extreme cost pressures and is fragile." He urged Rachel Reeves to intervene and reduce the risk of viable businesses being lost.
The industry body has called for targeted support, including the VAT cut, extending business rate discounts given to pubs to the rest of the sector, and relief on "non-commodity" charges on energy bills.
A Treasury spokesman responded, saying: "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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