Four tourism bodies have come together to urge Chancellor Rishi Sunak to introduce a permanent lower rate of VAT for specific businesses that are dependent on overseas visitors.

Mr Sunak is planning to raise VAT for hospitality and tourism businesses to 12.5% today and the tax will return to its pre-pandemic level of 20% next April.

But UKHospitality, Tourism Alliance, the Association of Leading Visitor Attractions, the British Institute of Innkeeping and the British Beer and Pub Association say rising VAT above 12.5% risks derailing the economic recovery.

They said hospitality and tourism were the hardest hit sectors during the pandemic, with spend down £100bn, which led to 12,000 businesses permanently closing and 660,000 job loses. “However, the reduction in VAT helped protect hundreds of thousands of jobs and allowed many businesses to stay open and serving customers when permitted to trade,” they said.

A survey of the trade associations’ members covering 815 businesses found that more than half were worried they’d have to reduce staff if VAT returns to 20%.

One in 10 said it could cause their business to close.

In a joint statement, the trade bodies said: “Businesses are at a perilous stage of their recovery after what’s been a devastating 18 months. Costs are increasing and there are numerous operational challenges for them to deal with, specifically around labour and product supply.

“A reduction in VAT has helped many of our businesses survive to this point and was most welcome. However, the return of VAT to its pre-pandemic level next year would curtail investment, restrict growth, set back our tourism recovery and risk yet more painful job losses. 

“We’re now calling on the Chancellor to commit to introducing a permanent 12.5% rate of VAT in his upcoming Budget, later this month. This will help protect jobs and continue the support for our hospitality and tourism businesses which contribute hugely to the nation’s economic and social wellbeing.”