Local businesses comment on upcoming Budget as MPs call for 5% VAT to 'save our high streets'

South Devon MPs are warning that the “beating heart” of local high streets is at risk as new polling shows widespread concern that pubs, cafés, restaurants and independent businesses could close without urgent support in this week’s Autumn Budget.

Liberal Democrat MPs Caroline Voaden, Steve Darling and Martin Wrigley raised the alarm after party-commissioned polling revealed that across the South West:

• 62% are worried about losing their local pub

• 71% fear cafés and restaurants could shut

• 45% believe bars and nightclubs are at risk

• 51% are concerned about losing their local hairdresser

The warnings come a year after Chancellor Rachel Reeves delivered what the Lib Dems describe as a “jobs tax” through higher National Insurance contributions - a move they say has left many hospitality businesses struggling to survive.

Last week, the party called for an emergency VAT cut to 5% for hospitality until April 2027, arguing the sector needs a “£7.5bn life raft” to avoid further closures.

Concern over impact of National Minimum Wage rise

From April, the National Living Wage and National Minimum Wage will rise, boosting pay for around 2.7 million workers across the UK.

While the increase is welcomed by low-income workers, some local employers fear they will struggle to absorb higher wage bills at a time when energy, produce, insurance and alcohol duty costs are already high.

Businesses say the combination of rising payroll costs and unchanged VAT could make it harder to take on new employees - or even retain existing staff - unless additional support is announced in the Budget.

Local MPs call for urgent action

Caroline Voaden, Liberal Democrat MP for South Devon, said: “The Chancellor cannot deliver another doom and gloom Budget that risks further decline for people and businesses in South Devon and beyond.

"Confidence has barely got off the floor since Ms Reeves’ Budget last year and businesses are still feeling the pinch, particularly in hospitality. That is why the Liberal Democrats are urging the Chancellor to adopt our plans to save the high street and put money into people’s pockets – paid for by the big banks’ profits.”

Steve Darling, Liberal Democrat MP for Torbay, said: “Torbay has already felt the pain of losing much-loved venues like Living Coasts and the Printers Elbow pub, and the uncertainty facing Paignton Zoo shows how fragile our hospitality sector has become. If the Chancellor fails to act this week, more of the beating heart of our high streets could be ripped away.”

Martin Wrigley, Liberal Democrat MP for Newton Abbot, said: “The Government's ill-advised jobs tax has caused nothing but problems for small and medium businesses, and it now seems that our hospitality sector is in danger. With people having less money to spend in pubs, restaurants and cafes, plus the damaging increase in employer National Insurance contributions, our hospitality premises are facing a bleak future, one which they may not survive.”

He added that the party is calling for a 5% VAT rate to help “save our high streets”.

Local businesses echo concern

Gary Salter, owner of The Lighthouse Continental Café Bar on Torquay Harbour, comments on the challenges facing the hospitality sector: "The biggest effect on the hospitality industry has always been VAT, along with taxes on wages, National Insurance, and business rates, which will always affect small businesses.

"In Europe, hospitality is still taxed at 5–10%, while here in England we’re still charging 20%. When the Budget is announced, it will only push small businesses to look for ways to cut expenses.

"During Covid it proves that the hospitality industry can thrive as long as they reduce the VAT to 5% on food. That was a big boost for our industry and this is the way forward for growth. No taxing businesses to the state where they are not recruiting staff.”

A spokesperson for Arena Torquay added: “We’d like to see business rates reduced for the leisure trade and the system reviewed as a whole. Vat reduced or removed on ticket sales, no increases in alcohol tax and measures that support growth not hinder it such as the last NI rise.”

With the Autumn Budget due today, MPs and businesses say the Chancellor must act to prevent further closures - and protect the places that hold communities together.