The Isle of Man Chamber of Commerce is calling on the government to take ‘urgent action’ to protect the future of the island’s hospitality industry.

The plea comes after several businesses announced plans to close, including the popular Tea Junction Cafe in Douglas.

Ballaquinney Farm’s also recently revealed it would stop growing Manx potatoes after 50 years.

Both businesses cited rising costs as a factor in their respective decisions.

And the Chamber of Commerce’s President said that financial pressures are ‘mounting day by day’ on a number of other businesses across the island.

An emergency ‘call to arms’ meeting was held at the Creg Ny Baa last week and was attended by members of the Licensed Victuallers’ Association (LVA), the Isle of Man Restaurateurs’ Association and representatives from the wider hospitality sector.

Following the crunch meeting, the LVA issued a damning statement which called for changes to minimum wage legislation and taxes.

In a statement issued by the Chamber of Commerce this week, the group said it had been complaining for months about the ‘devastating impact’ VAT, rising costs and staff shortages were having on the sector and that the situation was now ‘on the verge of approaching a crisis point’.

The Chamber’s President Kristan McDonald has now added the group’s voice to the growing chorus of calls for help.

He said: ‘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.

‘As [the] 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 Chamber of Commerce is the island’s biggest business network and represents firms employing around 22,000 people.

The group says the hospitality sector is worth around £90 million to the Manx economy and wants an ‘urgent dialogue’ between businesses, trade associations and the government’ to stop more business closing and support long-term growth in the sector.

One of the Chamber’s biggest bones of contention is the island’s current VAT rate, which it says places a ‘significant strain on the hospitality and other sectors’.

The Isle of Man’s Value Added Tax (VAT) rate is currently set at 20%, the same as it is in the UK although significantly higher than the other Crown Dependencies.

In Jersey, the VAT figure is 5% while in Guernsey there is no VAT or any other consumption tax.

The group ‘strongly believes that alternative solutions need to be considered in order to offset this and other impacts’.

Mr McDonald added: ‘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.

‘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.’

Speaking in the House of Keys on Tuesday, Treasury Minister Dr Alex Allinson seemingly rebuffed immediate calls for a VAT reduction.

He said that reducing rates for businesses in the hospitality sector would lead to tax increases elsewhere or cuts to frontline government services in order to balance the books.

National VAT data is used to determine the island's share of indirect tax revenues it receives from the UK under the Final Expenditure Revenue Sharing Arrangement, according to the Minister.

Dr. Allinson said the revenues the island receives from this agreement makes up around 28% of the government's income.

He told the House of Keys that each 1% reduction in VAT for hospitality businesses would result in a yearly loss of around £2.5 million in revenue for the Isle of Man Government revenue.

He confirmed that both he and Enterprise Minister Tim Johnston would meet with LVA representatives to explore 'sustainable solutions' to the issues raised.

What do you think about the concerns raised by businesses in the hospitality sector? Let us know by writing to [email protected]