UK hospitality seeks 10% VAT to match European rivals
A quarter of UK hospitality businesses are now losing money, prompting a high-profile campaign for a VAT cut that would align Britain with much of Europe but cost the Treasury up to £12bn.
Nearly a quarter of British pubs, bars and restaurants are currently operating at a loss, a sharp increase from 15% just three months ago. The rapid deterioration in margins means one in six businesses now risk going bust within 12 months, while 5% report they are no longer financially viable. In response, major industry figures are launching a public petition to slash the sector's VAT rate from 20% to 10%.
The campaign, branded "VAT’s the problem", underscores a widening tax disparity between Britain and its European neighbours. While the UK charges 20% on food and drink service, the European average stands at 12.8%. Competitors like France, Spain and Italy all apply a 10% rate, Germany charges just 7%, and the Republic of Ireland is scheduled to drop its rate to 9% this Wednesday.
British operators are struggling to absorb a domestic combination of rising employer national insurance contributions, an increased national minimum wage, and stubbornly high energy costs. “Our hospitality culture in the UK is the best in the world, but we continue to be hit with unfair levels of tax,” said chef Tom Kerridge, who is leading the push. He is backed by Greene King chief executive Nick Mackenzie, Wahaca founder Thomasina Miers, and chef-restaurateur Ravneet Gill.
Implementing the proposed tax reduction would require the Treasury to forgo between £10.5bn and £12bn in revenue. Andy Burnham, a prime ministerial hopeful, has previously indicated tentative support for the policy, though he omitted it from a Monday speech on economic priorities. Industry trade bodies maintain that a VAT cut would be the “most impactful” way to reverse the trend, citing the “devastating impact” of current taxation levels.
The proposal faces significant scepticism from the independent thinktank Tax Policy Associates. The group warned that a blanket VAT cut would primarily enrich large corporations rather than small, independent venues, arguing the £12bn could be better spent to spur wider economic growth. Yet for those facing immediate closure, the calculation is simpler. “The number of businesses now operating at a loss is accelerating rapidly and too many businesses are facing the gut-wrenching decision of whether they have to close their doors for good,” the trade bodies said.
