Restaurants refuse to pass on VAT cut

Leading London restaurants are failing to pass on the full cut in VAT to customers.

The Government has slashed the tax, which also applies to served food, from 17.5 per cent to 15 per cent in the hope that reduced prices will encourage people to spend more. But many restaurateurs are hampering the bid to revive the economy by refusing to cut the cost of their dishes.

Mike Gottlieb, who owns Christopher's restaurant in Covent Garden and The Enterprise in South Kensington, said: "Most people I'm talking to are doing what I'm doing and leaving prices as they are." Mr Gottlieb, who is also president of the Restaurant Association, added: "It's a huge amount of work in a short period of time to change all the prices. And at the busiest time of year. We just can't afford to have teams of people sorting it out."

D&D London, which owns at least 20 high-end restaurants across the capital including Quaglino's, Floridita and Coq d'Argent, said it is absorbing the tax cut into its profit margins.

A spokesman said: "We have decided not to reduce our prices to reflect the reduction because since 2007 we have had a policy of maintaining or reducing prices in our restaurants, despite increases in food and energy costs." The group said it will regularly review prices to ensure it "remains competitive".

Gastropub Great Queen Street in Covent Garden said it is not adjusting menu prices because its food is "already very good value".

But most other restaurant chains said their customers will see the full benefit of the tax cut, which came into force yesterday, with those that have not had time to reprint menus instead adjusting the final bill at the till.

But YO! Sushi, which has more than 20 branches in London, said it would not change prices as it thinks clients will be confused.

A spokesman said: "Plates are colour-coded with six simple price points. Our customers are used to and recognise the transparency of our pricing. Introducing the cut would involve changing the prices to awkward numbers."

But the Japanese fast-food outlet insisted it would be passing on savings in the form of more discount promotions next year.

A free glass of wine or beer is currently being offered to customers at its Selfridges branch who spend more than £15. Indian restaurant and take-away chains Bombay Bicycle Club and Tiffinbites are offering a free side dish, such as poppadoms or samosas, with each order instead of changing food prices while it waits to reprint its menus.

VAT applies to hot take-away food but not cold.