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The UK's hospitality industry is facing mounting financial pressure, with new research showing that almost one in four pubs, bars, and restaurants are now operating at a loss. Industry leaders are urging the government to reduce Value Added Tax (VAT) on hospitality services, arguing that the move is essential to protect businesses and jobs.
The campaign, led by celebrity chef Tom Kerridge and supported by well-known chefs, restaurateurs, and hospitality executives, is calling for the VAT rate on food and drink services to be reduced from 20% to 10%. Under the slogan "VAT's the Problem," the initiative aims to gather public support through a nationwide petition launching this week.
Recent survey findings commissioned by hospitality trade organizations reveal that 23% of businesses in the sector are currently losing money, up significantly from 15% just three months ago. The data also highlights growing concerns about the industry's future, with around one in six businesses fearing they could close within the next year, while 5% believe they are no longer financially sustainable.
Hospitality operators say rising costs are placing unprecedented strain on businesses. Higher employer National Insurance contributions, increases in the National Minimum Wage, persistent inflation, and elevated energy prices have all squeezed already narrow profit margins.
Supporters of the campaign argue that the UK's hospitality VAT rate is among the highest in Europe. Countries such as France, Spain, and Italy apply a 10% rate on hospitality services, Germany charges 7%, and the Republic of Ireland is reducing its food-service VAT rate from 13.5% to 9%.
Tom Kerridge said the UK has one of the world's strongest hospitality cultures but continues to place an unfair tax burden on businesses. He believes reducing VAT would help restaurants, pubs, and cafés remain competitive while preserving thousands of jobs across the sector.
The campaign has gained backing from several prominent figures, including Wahaca founder Thomasina Miers, Greene King Chief Executive Nick Mackenzie, and chef-restaurateur Ravneet Gill. Together, they argue that lower VAT would provide immediate financial relief and encourage further investment in the industry.
However, not everyone agrees with the proposal. The independent think tank Tax Policy Associates has questioned the effectiveness of a broad VAT reduction, suggesting that the estimated £10.5 billion to £12 billion cost to the Treasury could potentially be invested in other economic growth initiatives. Critics also argue that larger hospitality chains may benefit more than smaller independent businesses.
Despite differing opinions, hospitality organizations insist that urgent government action is needed. They warn that the number of loss-making businesses is rising rapidly and that many owners are facing difficult decisions about whether they can continue operating.
Industry representatives say reducing VAT would be one of the fastest and most effective ways to ease financial pressures, safeguard employment, and help ensure the long-term survival of the UK's hospitality sector.
