ukactive

University of Birmingham Study Group 2024

Quantifying the effect of tax reforms to support an active, healthy population

About ukactive

ukactive is the UK’s leading not-for-profit membership body for the physical activity sector, bringing together more than 4,000 member organisations and partners in a shared ambition to get More People, More Active, More Often. ukactive is built across three clear areas of purpose which inform its strategic vision and day-to-day work: a) to support, protect and inform our members, b) to represent and champion our members, and c) to help our members grow. To achieve this mission and fulfil these purposes, in 2021 ukactive set out a shared ambition for growth - five million new people regularly using gyms, pools, and leisure centres on a regular basis by 2030. This is Vision 2030, and this growth would support the health and fitness needs of over 20% of the UK population – up from 15% penetration before the pandemic.

From gyms, leisure centres, studios, sports bodies, and other activity providers, to major health bodies, consumer brands and equipment manufacturers, ukactive’s community collaborates across the private, public and third sectors. ukactive facilitates high-impact partnerships, conceives, and drives breakthrough campaigns, conducts critical research, and lobbies the Government to recognise the power of the physical activity sector to address today’s biggest issues – including ‘levelling up’ health, reducing the burden on the NHS and social care, reducing crime, revitalising our high streets and communities, tackling loneliness and driving our physical and mental recovery from COVID-19. 

The ukactive Research Institute operates a data and insight arm, which aims to provide comprehensive market insight and generate regular, up-to-date, and actionable Business Intelligence reports for the sector. This is done through the ongoing collection, processing, and analysis of a variety of data sources which allows exploration into consumer trends and patterns across the whole industry and also at an organisational level. This is done by working closely with individual ukactive members, having an ongoing partnership with 4GLOBAL and conducting repeat consumer polling with Savanta ComRes.

The challenge to address

In terms of physical activity, the UK currently sits 11th in Europe among comparable nations, and this has a direct impact on our economic health. We know physical activity improves and prevents a plethora of health conditions. Sport England's 2023 adults Active Lives survey highlights that a quarter of the UK individuals are totally inactive (25.7%) while a further 10.9% are not active (‘fairly active’) enough to reap the full health benefits (36.6% in total). 

We also know that our working age individuals are also at risk of higher levels of inactivity, which subsequently impacts both their own wellbeing and satisfaction at work, plus the economic growth of individual businesses and the wider economy. The most recent Britain’s Healthiest Workplace survey (Oct 2023)19 indicates that of the 4,787 employees at 59 organisations polled, 58% of employees reported being overweight, 23% reported being obese, 37% disclosed a lack of physical activity and 10% reported being depressed. This year, loss in productivity was 27.9 days a year for C-suite top managers and executives, rising to 51.5 days among non-managerial employees, with the above factors being indicators of ill-health / sickness absence.

Slow economic growth cannot be separated from our poor health, which includes physical inactivity. Economic growth is being hindered by low productivity and people of working age dropping out of the workforce at an alarming rate due to health problems – notably long-term sickness and absence caused by musculoskeletal (MSK) or mental health conditions. There are currently 2.5 million people of working age that are economically inactive, with long-term sickness costing £13.5bn a year. More than half of these (53%) are reportedly inactive because of a mental health issue (e.g. anxiety, depression, stress), and 945,000 report a physical health issue (such as an MSK condition). These are conditions that can often be attributed to or exacerbated by physical inactivity and can be prevented or treated with physical activity.  

Getting more people to be physically active offers huge benefits for the health of the nation, which in turn reduces pressures on the NHS and boosts economic productivity, both of which have a positive financial impact in generating returns for the Treasury.  

ukactive have several policy calls that focused on economic growth and national health - through the promotion of physical activity participation - two of the government’s biggest priorities, and support opportunities for its members and sector to grow. The two highlighted in this document focus on tax reforms. Through this ukactive aim to establish an economic environment for physical activity providers to grow rather than just survive – through tax and regulatory reform for private sector operators, and investment for aging public sector facilities and services.

The proposed solution

Improving occupational health to enable national growth: Workout from Work

ukactive requests that the Government extends the Cycle to Work scheme to include a wider array of physical activity opportunities and accessories such as fitness trackers and gym memberships to support the health and wellbeing of the working population.  This is called ‘Workout from Work’.

A cost-benefit analysis was conducted in 2017, of expanding the Cycle to Work scheme shows it would lead to a surge in activity participation, and savings to HM Treasury of £240m – through reduced NHS costs, improved workplace productivity and reduced premature mortality.  

It also identified the following returns:  

Year-by-year cost calculations (£m)  

Year-by-year cost calculations (£m)  

Changes in working practices since the Covid-19 pandemic, including significantly increased working from home, have only increased the potential for this policy to provide significant benefits for employees, employers, and the Government. An UpToDate cost-benefit analysis is needed.

Growing the sector to support national health: VAT reductions

ukactive requests the Government permanently reduce the level of VAT charged on health and wellbeing businesses such as gyms, pools and leisure centres, to incentivise physical activity and promote growth.  

Of the 15 countries included in a study by ukactive’s National Sector Partners Group, researchers found that the UK has the 3rd highest direct healthcare costs of non-communicable diseases and mental health (NCDs) attributable to physical activity. 

To get more people active, we need to grow the fitness and leisure sector, incentivise people to get active and remove the barriers people face in accessing and using fitness and leisure facilities.  

Reducing VAT will stimulate the growth of the sector, which will in turn give operators the ability to build more facilities in those areas in need and allow for a more competitive pricing market for consumers.

This has been successfully seen in other countries around Europe, who have reduced VAT for admission to gyms, pools and leisure centres to increase physical activity participation. Malta reduced VAT for facilities from 18% to 7% in 2016, with the clear intention of promoting healthy living. Overall, there was a reduction from 72% of people being classed as physically inactive in 2008, to 64% by 2018. Portugal and Czech Republic have followed suit, reducing VAT in 2020.  Ireland also recently reduced its VAT for gyms and leisure centres to 9%, coinciding with a 2% increase in physical activity levels.    

This analysis has not been conducted thoroughly in the UK and to bring this policy to treasury, a full analysis of the potential impact that VAT reductions on leisure facilities would have on the physical activity levels in the UK is needed. Currently we are missing evidence demonstrating a clear link between a reduction in VAT leading to an increase in activity levels. This is what we want to try and explore, using other countries as a basis / example for that predictive analysis.

Current information

We have a range of primary and secondary data which can be used to support this challenge.

Primary data

• Sport England’s Active Lives physical activity data.

• ukactive's Consumer Engagement quarterly polling data. 

• Private sector leisure centre trends.

Secondary data

• The initial cost benefit analysis for Workout from Work conducted in 2017 by Saffery Champness (details as shown above).

• National data (Office of National Statistics, ONS) on the impact of inactivity on the productivity of the workforce and influence on economic inactivity.

• Public sector leisure centre trends (via Sport England). 

• Factsheets on the impact of VAT reductions in European countries.

• Sport and Recreation Alliance research on the impact on economic growth and wellbeing if the UK was the most active country in Europe.

Preferred outcome(s)

Ideally, we would like to make progress in one or both of the below areas. 

• An up-to-date cost-benefit-analysis (CBA) conducted on the benefit of the Workout from Work, which ukactive can use to take the treasury. Since the initial CBA was conducted in 2017, the UK has experienced a global pandemic which has had significant impact on the workforce’s working patterns and therefore physical activity habits. An up-to-date CBA would better reflect the value that an expanded Cycle to Work scheme would have in supporting non-office based / remote / hybrid working age individuals. 

• The beginning of a more thorough analysis of the impact that potential VAT reductions on the fitness and leisure sector facilities would have on the physical activity levels of individuals across the UK. Currently, it is not possible to provide a tangible argument to government to invest money into VAT reduction across the sector, because we lack the evidence to demonstrate this would have the same impact on physical activity levels as it has in our neighbouring European countries. To increase our chances of securing the necessary funding for the sector, this analysis is therefore needed. We believe we can use data that already exists from neighbouring countries to support such predictive analysis.

Progress on the above will allow us to continue to look for solutions that will support the sector to grow and support individuals to have access to their local facilities. The above solutions will help both the fitness and leisure sector and workplaces provide a health offer to employees and individuals that reflects the needs of the public post the pandemic.