More than 250 business leaders have urged the Government to keep VAT at 12.5% to help the recovery of fragile hospitality and leisure firms.

In a letter to Chancellor Rishi Sunak, 261  hospitality and leisure business leaders warn that April’s planned rise to 20% will “exacerbate the squeeze on household finances”.

They say customers are feeling the pinch from increasing costs while firms face higher prices for labour, energy and food and drink supplies.

They are calling on Mr Sunak to rethink the increase as under these circumstances “the reduced rate is ever more important”.

Business leaders from Apex Hotels, BaxterStorey, Bourne Leisure, Big Table Group, Caffe Nero, Center Parcs, Cote, Fuller’s, Greene King, Hilton, IHG Hotels and Resorts, JD Wetherspoon, Loungers, Marston’s, Mitchells & Butlers, Moto Hospitality Nobu, Parkdean Resorts, Pho, Pizza Express, Pizza Hut, Punch Pubs, Revolution, Rekom, The Restaurant Group, The Savoy Hotel Group, Wagamama and Young’s, are among those who have signed the letter.

A major concern of the impact of the VAT rise is that businesses will have no choice but to significantly raise their prices, further fuelling inflation across the economy.

Business leaders also fear that April could be a “cliff edge” for the hospitality industry, as the VAT increase  is set to happen alongside a rise in the national minimum wage, plus changes to business rate relief and an end to the rent moratorium.

The letter says: “The reduced rate also bolsters deliverability of many of the Government’s key policies – including levelling up, high street regeneration, employment and skills growth, and investment in net zero – allowing our sector to fully play its part in an economic recovery.

“The Government has rightly celebrated being the most open nation in Europe following the Omicron variant.

“As we look to revive our tourism, maintaining a reduced rate of VAT is imperative, as it simply brings us in line with the levels of VAT levied in our competitor European nations.”

UK Hospitality chief executive Kate Nicholls said: “This is about so much more than an extension to temporary measures in the face of the challenges brought by Covid, it’s about working to establish the right tax level for our world-class hospitality and tourism industries.

“It is vital, in the interests of competitiveness, job creation, growth and ensuring hospitality and tourism play their full part in driving the economic recovery.”

A Treasury spokesperson said: “We’ve supported hospitality jobs and businesses throughout the pandemic with our £400 billion package of funding and continue to do so.

“We’ve always been clear that the lower rate of VAT was a temporary measure to support businesses as they recover and thanks to the strength of our fantastic vaccine programme, which has enabled restrictions to be lifted and the economy to reopen, it’s right that our package of support reflects this.”