Proposed plans to introduce a “holiday tax” in England could put up to 33,000 tourism jobs at risk and reduce Treasury revenues by nearly £700 million, according to new analysis that has intensified opposition from the hospitality sector.
Research by Oxford Economics, commissioned by UKHospitality, suggests that giving regional mayors the power to impose visitor levies would have a materially negative impact on tourism demand, spending and wider economic activity.
Under the government’s proposals, mayors would be able to introduce local taxes on overnight stays in hotels, guesthouses, hostels and holiday lets, with revenues earmarked for transport and infrastructure projects. The level of the levy would be determined locally, and implementation would be optional.
The most severe scenario modelled, a 5 per cent levy on accommodation, could result in a £1.8 billion decline in tourism spending by 2030 and the loss of 33,000 jobs across the sector. The same scenario is also expected to reduce overall tax receipts by £688 million, reflecting lower economic activity.
Alternative models also point to significant impacts. A flat £2 per person per night charge could reduce spending by £846 million and lead to 16,000 job losses, while a £2 per room levy would still result in around 7,000 fewer jobs and a £400 million drop in tourism expenditure.
Matthew Dass of Oxford Economics said the policy risks weakening the UK’s competitive position as a destination, particularly given the existing 20 per cent VAT rate applied to hospitality services.
“An additional tax would further weaken the country’s competitiveness,” he said, warning of broader negative consequences for the economy.
Leaders across the hospitality and tourism sector have reacted strongly to the proposals, arguing that additional costs would deter both domestic and international visitors at a time when the industry is already under pressure.
Allen Simpson, chief executive of UKHospitality, said the levy would “hike costs for Brits, make staycations more expensive and decimate tourism”.
Operators warn that reduced visitor numbers would not only affect hotels and accommodation providers, but also have knock-on effects across local economies, particularly in regions heavily reliant on tourism for employment and investment.
Simon Palethorpe, chief executive of Haven Holidays, said the tax could discourage domestic travel and reduce economic activity in areas with limited alternative employment opportunities.
Meanwhile, Fiona Eastwood, head of Merlin Entertainments, said the proposals risk making short breaks unaffordable for many working families, while Hilton executive Simon Vincent warned the move could make the UK less attractive compared with competing destinations.
The government has framed the policy as a way to give local leaders greater control over funding for infrastructure and public services, particularly in high-traffic tourist areas. However, critics argue that the economic trade-offs may outweigh the potential benefits.
The consultation on the proposals, which explored different levy structures and rates, concluded last month, with the government yet to confirm its final position.
The debate comes at a time when the hospitality sector is already facing a challenging operating environment, including rising employment costs, higher business rates and fragile consumer confidence.
For policymakers, the challenge lies in balancing the desire to generate additional local revenue with the need to maintain the UK’s competitiveness as a tourism destination.
Industry leaders are urging the government to focus instead on measures that stimulate growth, increase visitor numbers and support investment, rather than introducing additional costs that could suppress demand.
With tourism playing a critical role in regional economies and employment, the outcome of the policy debate is likely to have far-reaching implications, not just for the sector itself, but for the broader UK economy.
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Holiday tax could cost 33,000 jobs and £700m in lost revenue, industry warns