How coffee VAT cuts have affected UK cities differently

Abigail Fenton
·Writer
Photo: Sorin Sîrbu/Unsplash
Photo: Sorin Sîrbu/Unsplash

The average latte costs Brits 13p ($0.17) less now, thanks to new VAT cuts — but some cities are saving more than others.

Chancellor Rishi Sunak announced the £4.1bn of cuts, which will see VAT on hospitality reduced from 20% to just 5% in an attempt to boost the UK’s economy following the COVID-19 lockdowns, in early July, as part of the summer budget.

Many firms have chosen to pass this on to customers by cutting their prices, Britain’s four biggest coffee chains — Starbucks (SBUX), Caffe Nero, Pret A Manger and Costa Coffee — among them.

The average cost of what each chain deems a “regular” latte is now £2.63, down from £2.76 before the VAT cut — a saving of 13p, or £15.60 every six months for daily drinkers, according to ThinkMoney.

However, coffee drinkers in Birmingham are saving the most, with the average cost of a latte dropping by 19p, from £2.79 to £2.60, after the VAT cuts — a saving of £22 over six months for daily drinkers, the financial experts’ analysis found.

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Those in Leeds follow closely behind, with the average latte down 18p, to £2.65, after VAT cuts.

Sadly, Newcastle and Bristol residents are only saving 6p after the cuts, or just £7.20 over the six-month VAT holiday. The average cost of a latte in these cities is now £2.67, from £2.73.

Meanwhile, Londoners are, unsurprisingly, paying the most regardless of cuts. An average latte in the capital costs about £2.69 — 9p pence more than in the cheapest city, Birmingham.

In fact, Londoners who buy a coffee every weekday — if prices remained constant — will spend about £9,092 on coffee over their working lifetime. Meanwhile, Birmingham residents will spend £8,788 — £304 less, or 113 cups of coffee.

Bristol and Newcastle (£2.67) and Liverpool (£2.66) are also among the priciest cities.

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The study also found when it comes to value for money, Starbucks (SBUX) is the UK’s best coffee chain. A regular tall latte works out at £0.0069 per millilitre of coffee, offering 354ml for an average of £2.63.

Pret A Manger’s comes in a close second at £0.0070 per millilitre, or £2.40 for their regular sized 340ml latte.

Caffe Nero is the most expensive, at £0.0082 per millilitre of coffee, or £2.80 for a regular latte.

Meanwhile, Costa Coffee comes in at £0.0073 per millilitre, or £2.50 for a regular latte.