Reduced VAT and Dining Out to Boost British Economy

A 15% VAT cut has been implemented to help restart the British economy.

Restaurant Economy 

On July 4th, restaurants and cafes were officially allowed to reopen in the UK. The hospitality industry is one of the most affected during the coronavirus pandemic and the government is actively trying to stimulate the reopening. Hospitality staff has been on the government furlough scheme since the start of the initiative. Now, the government is developing incentive schemes to try and encourage eateries to reopen and pay staff. However, many are still choosing to stay closed and keep their staff on government funds.


A government-enforced VAT cut of 15% is hoping to ease the effects of coronavirus on the economy. The VAT cut applies across restaurants, cafes, hotels, attractions and holiday parks. The grand total of the VAT cut is £4 billion. Usually consumers absorb this tax when buying everyday goods and services. Typically 20%, VAT for a limited time is only 5%. Now, businesses are in a unique position to offer their goods and services at a lower market price. 

Client Versus Capital 

Many companies are using these cuts as an opportunity to offer discounts for their customers. Best Western hotels and grocery giant Waitrose have already promised customer benefit. Wahaca, KFC, and McDonald’s are just some of the restaurant and cafe chains promising discounts for their clients. Costa Coffee is reducing latte prices from £2.55 to £2.23. Starbucks have promised to pass the full 15 percent discount to customers purchasing their coffees. 

However, not all companies are adopting the same approach. The National Gallery said that exhibition tickets will remain at full price. Many small businesses are planning to use the additional money for company gain rather than client discount. This is unsurprising as many companies are in a poor financial position after these past months. Yet, by not offering client incentive, it may be hard to kickstart business. 

Consumer Attitude to Dining Out 

July 4th saw many flocking to pubs and restaurants, excited about the prospect of their first drink out of the house in many months. However, lockdown has also shown many the value of eating at home. Creativity in the kitchen and family meals are just some of the benefits experienced during lockdown. Many now view eating out as an unnecessary luxury. Even with the government incentives, it will be hard to overcome this new consumer mentality and reboost the economy.