Nearly a quarter of UK pubs, bars and restaurants are losing money, according to new survey data released as a group of celebrity chefs and business owners intensified their campaign for a sector-specific VAT reduction. The campaign, spearheaded by chef Tom Kerridge, calls for cutting VAT on hospitality from 20% to 10%.
Campaign Launch and Petition
Under the banner “VAT’s the problem”, the campaign launched publicly on Wednesday, aiming to convince visitors to venues across the country to sign a petition backing the reduction. Kerridge, who has six venues and three Michelin stars, stated: “Our hospitality culture in the UK is the best in the world, but we continue to be hit with unfair levels of tax.”
Financial Pressures on the Sector
Labour’s decision to increase employers’ national insurance contributions and the national minimum wage, combined with soaring inflation and energy costs, have piled pressure on a sector operating on threadbare margins. Survey data commissioned by industry trade bodies indicates that 23% of respondents are losing money, a significant jump from 15% three months ago. One in six businesses said they risk going bust within 12 months, while 5% reported they are not financially viable.
VAT Reduction as a Solution
The industry is focusing its efforts on securing a VAT cut, estimated to cost the Treasury between £10.5bn and £12bn. The policy has received tentative backing from Greater Manchester Mayor Andy Burnham, a prime ministerial hopeful. The UK’s 20% VAT rate on food and drink service is higher than the European average of 12.8%. France, Spain and Italy all charge 10%, Germany charges 7%, and the Republic of Ireland is due to lower its rate for food-led businesses from 13.5% to 9% on Wednesday.
Support and Scepticism
Kerridge is backed by figures including Wahaca founder Thomasina Miers, Greene King chief executive Nick Mackenzie (whose chain operates 2,700 venues), and chef-restaurateur Ravneet Gill. However, the independent thinktank Tax Policy Associates expressed scepticism, warning that a VAT cut would mainly benefit big businesses and that £12bn could be better spent to spur growth. In a joint statement, trade bodies highlighted the “devastating impact” of taxation, saying: “The reality is stark. 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 government needs to act to back hospitality and reduce its tax burden.”
