Actividad empresarial en el Reino Unido se contrae a medida que la economía enfrenta una tormenta perfecta

Tina McKenzie, chair of the Federation of Small Businesses, said the VAT cut was food news for restaurants, pubs, soft plays and attractions that have “spent years fighting rising costs and shrinking marginsâ€.

With 44 per cent of small hospitality firms based on or near the high street, a VAT cut should help put bums on seats and bring life into our town centres this summer.

With families switching from international travel to domestic travel this summer, they'll be more people out and about on our local high streets. For many small firms, these next few months matter enormously after a bruising period of rising costs and squeezed consumer spending. Families will make extra purchases, such as drinks and merchandise, which is likely to be the biggest help to small businesses' bottom lines.

… A strong summer could be the difference between staying afloat and shutting up shop for some businesses.

The cut on VAT for summer attractions – which the government is calling its “Great British Summer Savings scheme†– comes alongside the news that children aged five to 15 in England will be able to travel free on local bus services in August.

The scheme is estimated to cost about £300m.

Kate Nicholls, chair of the industry body UKHospitality, says:

It's good to see the government recognise the importance of a lower rate of VAT for hospitality as the quickest and simplest way to lower prices and boost consumer confidence.

A 5% rate of VAT for children's meals and tickets is a good step to help families enjoy a great British break this summer.

If there is scope to further support families by including accommodation in this reduced rate, I would encourage the Chancellor to do so to help tackle one of the biggest costs of a family holiday.

This should now be viewed by government as a downpayment on a wider shift to a lower VAT rate for the entire hospitality sector, to bring us in line with Europe. Our biggest competitors benefit from VAT rates that average around 10%, and can be as low as 7%, and the UK is a clear outlier.

As the government has recognised today, VAT is the single biggest lever it can pull to lower prices, tackle inflation, drive demand, boost spending, generate growth and create new jobs. I would urge it to be bold and cut VAT for the entire hospitality sector.â€

Reeves has also confirmed that the government will freeze tariffs on more than 100 different foods sold in supermarkets.

She said she is clear she expects supermarkets to pass these savings on “in full†to their customers.

Reeves announces a temporary cut to VAT on summer attractions from 20% to 5%.

This will apply to ticket prices for adults and children, covering attractions such as fairs, theme parks, zoos and museums, she says.

It will include children's tickets for cinemas, concerts, soft play and the theatre, and it will cut the cost of children's meals in restaurants and cafes from 20% VAT to 5%, she says.

The changes will apply across the UK from the start of the Scottish school holidays on the 25th June, and run until the end of school holidays in England, Wales and Northern Ireland on the 1st September.

According to the Treasury, if these businesses pass on the full VAT savings to their customers, then for a family of two adults and two children it would mean:

• £20 off the family's tickets to a theme park

• £2 off entry to soft play

• £6 off the family's tickets to a farm attraction

• £17 off the family's tickets to a wildlife park

• £1.50 off the children's tickets to the cinema

• £9 off the family's tickets to the circus

• £2 off the children's meals on a lunch out

• £11 off the family's tickets to the aquarium

Reeves says she will bring forward changes to taxation of foreign branch profits, in a move that she says will raise hundreds of millions of pounds a year.

Currently, some oil and gas groups that operate overseas through foreign branches have structured their tax affairs in a way which ensures they pay little or no corporation tax on their UK energy trading profits. Today we are putting an end to that practice.

Reeves says she will also establish a £350m Critical Chemicals Resilience Fund to support “strategically important producersâ€, as well as a £120m fund to support the ceramics industry, designed to help them increase efficiency and drive down energy costs.

The conflict in the Middle East poses a significant challenge to the world's economy, including the UK's, she says.

She notes that Ofgem will confirm the level of the energy price cap that will apply from July.

I know that any increase will be felt by families because of the decision that I made at the Budget last year to cut £150 from energy bills. We have lessened the impact of rising prices, and current external forecasts suggest that the cap from July will be at a similar level to the cap in April last year.

We stand ready to act if market conditions worsen significantly later this year, and I have been leading cross-government contingency work on design of potential, future targeted and temporary support for businesses. Any support will also need to be carefully targeted at firms most exposed to the crisis.

The chancellor, Rachel Reeves, is now addressing parliament. She is expected to outline a package of measures aimed at easing the cost of living.

Oil prices are rising after reports that Iran's supreme leader ordered that the country's enriched uranium should not be sent abroad.

Brent crude, the international benchmark for oil, rose 2% to $107.32 a barrel.

It follows a report from Reuters which cited two unnamed “sennior Iranian sourcesâ€.

It comes more than a week after US president Donald Trump said talks with Iran were in their final stages.

The EU has cut its forecast for economic growth this year, amid worries around inflation triggered by war in the Middle East.

The European Commission has now projected that GDP growth in the EU will slow down to 1.1% this year, compared with a previous forecast of 1.4%.

Inflation in the EU is expected to reach 3.1% in 2026, a full percentage point higher than the last forecast, before easing back to 2.4% in 2027.

Some more gloomy figures this morning – British factory order books were at their weakest in May since September 2020, according to a survey by the Confederation of British Industry.

Its monthly balance of total new orders slid to -41 in May from -38 in April.

Cameron Martin, senior economist at the CBI, said:

Against an increasingly uncertain global backdrop, the conflict in the Middle East is feeding through to higher energy costs and renewed supply chain disruption, adding another layer of challenges for manufacturers, who are already grappling with weak demand.

Business activity across the eurozone also shrank in May, at its fastest pace in two and a half years.

The PMI index fell to 47.5 in May from 48.7 in April, S&P Global found, once again driven by a slump in the services sector.

Williamson said the data showed the eurozone economy taking an “increasingly severe toll from the war in the Middle Eastâ€.

Job losses are also starting to become worryingly widespread as business confidence in any swift turnaround in the adverse economic climate fades further.

The service sector is being hit especially hard by the surge in the cost of living created by the war, notably via the demandsapping impact of higher energy prices. While there has been some support to manufacturing from precautionary stock building, this boost is starting to fade, with demand for both goods and services now in decline.

The region's supply shock from the war is also intensifying, as indicated by increasingly widespread supply chain delays. Supply shortages threaten not only to constrain growth in the coming months but also have the potential to add further upward pressure to inflation.

The rise in the survey's price gauges already hints at inflation running close to 4% in the coming months which, combined with the growing signs of the region slipping into an economic downturn, creates a deepening dilemma for policymakers.â€