Pre-Budget Comment for the Travel Sector

Ahead of the Autumn Budget on 27 October, much of the travel sector remains on life-support due to the Covid-19 pandemic. The Chancellor needs to stand shoulder-to-shoulder with the sector to deliver crucial tax cuts and training incentives.

The Chancellor’s autumn budget statement must offer the UK’s travel sector hope for, not fear of, the future. The industry remains in critical need of support to come through the strife of the Covid-19 pandemic and Rishi Sunak needs to win it over and deliver, especially as additional factors such as growing inflation, increasing National Insurance Contributions, labour shortages and a potential energy crisis could place even greater strain on businesses.

 The most impactful way to embolden the travel sector is a freezing, or even better a reduction, of taxes. These should include reverting the current 12.5% VAT hospitality to 5%, as well as lowering or scrapping the expected rises of corporation tax and employers national insurance (which come into effect in April 2023 and April 2022 respectively). Doing so would help companies improve their cash flow, retain staff, and boost consumer confidence.

Although unlikely, a priority measure should be a reduction or suspension of Air Passenger Duty (APD) – something which has been asked for and denied every year for the last 10 years – as this would also stimulate demand and keep more people in work. Another is extending business rates relief, which would be yet another way to increase cash flows, especially as consumers continue to book holidays through Refund Credit Notes issued for holidays cancelled due to the pandemic. Also, as travel becomes increasingly digital and reliant on technology, an increase in Research & Development (R&D) relief would be a welcomed move.

As consumer demand begins to seep through, travel firms are increasingly experiencing challenging labour shortages due to many having left the industry when travel ground to an unprecedented halt last year. To address this shortfall, the UK government should urgently consider extending both the apprenticeship scheme and the Kickstart programme to train and bring through the next wave of travel professionals.

While demand for travel is slowly improving, the road ahead is fraught with potential perils, including rising inflation, increasing living costs and even the ongoing Brexit uncertainty. At this autumn budget, the Chancellor needs to stand shoulder-to-shoulder with the sector, boost consumer confidence and provide the much needed help the industry needs to make a positive contribution to the country’s economic recovery.

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