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Chamber calls for urgent government action to protect £90m hospitality sector

23 April 2024

Isle of Man Chamber of Commerce is calling on government to take urgent action to protect the future of the Island’s hospitality industry which is worth around £90million to the economy, and small businesses in other sectors.

The Island’s biggest business network – which represents firms employing around 22,000 people in total and has members within the hospitality sector – is calling for urgent dialogue between businesses, trade associations and government so that measures can be put in place to prevent further business closures and support long-term growth.

The move comes after several businesses have closed in recent months, and more are reporting to be struggling due to severe financial pressures. It also follows an emergency ‘call to arms’ meeting on April 18th at the Creg Ny Baa attended by members of the Licensed Victuallers’ Association, Isle of Man Restaurateurs’ Association, and the wider  hospitality sector.  The LVA issued a statement following the meeting in which the organisation highlighted how the Isle of Man’s higher VAT rates compared to other Crown Dependencies were ‘crippling our businesses’. The Isle of Man’s VAT rate is 20%. It’s 5% in Jersey, while in Guernsey there is no VAT or any other consumption tax.

Chamber has been campaigning for months about how VAT, rising costs, and labour shortages are having a devastating impact on the sector – but it now says the situation is on the verge of approaching a crisis point.

Chamber President Kristan McDonald commented: “Vibrant and sustainable hospitality and small business sectors are vital to the Island’s future prosperity. Not only are they the lifeblood of the local economy in terms of jobs, tax revenue and the role they play in the visitor economy, but they’re also an integral part of the fabric of the community and contribute massively to the quality of life we enjoy. Crucially, they also help to create the lifestyle ecosystem we can offer to everyone who we want to come to live and work here. The VAT rate, bureaucracy and government policies that affect small businesses are clearly having a detrimental impact. That’s why Isle of Man Chamber of Commerce supports the concerns raised by the LVA and Restaurateurs’ Association. As Chamber is also a representative

organisation, it’s clear that there is a strong consensus building in the business community about the need for urgent action. While the focus is on hospitality because the current pressures are felt most acutely by businesses in this sector, similar issues are affecting all small businesses.”

The current 20% VAT rate, says Chamber, places a significant strain on the hospitality and other sectors by impacting competitiveness and limiting growth. The business networks adds that there are a growing number of reports that interaction with the VAT office is proving increasingly difficult for many. Chamber strongly believes that alternative solutions need to be considered in order to offset this and other impacts.

One option which Chamber says should be on the table to address staffing shortages is offering workers tax breaks if they take up a second job, or even zero income tax for the second job as an incentive to take on multiple roles. However, the business network says that these issues are not the only factors affecting small businesses.

Kristan McDonald added: “Poor weather, an early Easter break – and the 2% increase in income tax announced in the Budget which also moves many lower earners into the top tax band – are all contributory factors which are creating a perfect storm. Time is running out for many businesses with the pressure mounting day by day. It’s time for the government to accept the seriousness of the situation and take steps to protect the sector before we lose EVEN more small businesses.”