THE UK Government is being urged to slash VAT for businesses such as hotels, visitor attractions and restaurants in a bid to build on the success Scotland’s tourism sector has enjoyed in 2014.
The Scottish Chambers of Commerce (SCC) is calling for the levy, which has a standard rate of 20%, to be reduced to 5% for accommodation, admission charges at tourist attractions and restaurant services.
Chief executive Liz Cameron made the plea as the organisation published a new report suggesting firms could enjoy a sales boost in the final three months of this year as a result of the “more stable business environment” after the independence referendum.
But the latest quarterly business survey said it would be “difficult” for firms to reproduce the “exceptional” performance that was achieved in the second quarter of 2014.
Speaking as the SCC’s survey was published, Ms Cameron said: “International events such as the Commonwealth Games and the Ryder Cup boosted tourism performance, with average room rates increasing for the sixth consecutive quarter. This boost does not seem to have been replicated in the retail and wholesale sector where more firms reported a fall in sales revenue than a rise, a trend that is expected to remain largely unchanged in the next quarter.
“It is important that Scotland builds upon the successes that the tourism industry has experienced in 2014 and this may be an opportune time for the UK Government to consider reducing the rate of VAT chargeable on accommodation, tourist attraction admission and restaurant services to 5%, in order to help our industry to compete on an even basis with other European nations.”
Overall Ms Cameron said businesses north of the border had “performed strongly over the year with positive indications of further expansion throughout the economy”.
But she added: “A number of businesses had cited the referendum on Scotland’s future as a concern and the continued difficulties in the eurozone and world economies present a challenge to business growth.”
The SCC report said the “high level of uncertainty caused by Scotland’s independence referendum” had been cited by some businesses as their greatest concern in the third quarter of this year.
It added: “Although this level of uncertainty is over, and sales growth and optimism growth figures are generally expected to be boosted by this more stable business environment, the exceptional figures achieved in Q2 will be difficult for businesses to replicate in Q4 of this year.”
A total of 422 firms from the key sectors of construction, financial services, manufacturing, retail and wholesale and tourism all took part in the survey, which was carried out by the SCC in conjunction with the Fraser of Allander Institute at Strathclyde University.
It indicated there had been “further expansion in the Scottish economy during Q3 but to a lesser extent than the previous high performing Q2”.
Ms Cameron said: “The construction sector and manufacturing sectors are still performing well but face ongoing challenges as both sectors experienced lower sales growth compared with the previous high performing quarter. For construction, almost half of businesses that tried to recruit in Q3 faced difficulties in doing so, potentially hindering further growth prospects.
“Businesses have indicated that employment trends remain promising and are expected to grow, as more firms report increased levels of hiring. In particular, the retail sector reported its highest increase in employment for 10 years.
“As business looks to hire more people, continued challenges exist, as key sectors are often unable to find the right talent to employ, potentially slowing down the pace of economic growth. For our members, creating a nation of skilled people is the priority which will strengthen Scotland’s pace of economic growth and boost our productivity.”