UK Hospitality Sector Urges VAT Cut Amid Closure Fears
Industry leaders and chefs call for a reduction in Value Added Tax to 10% to combat rising costs and prevent job losses, citing Ireland's recent cut.
Restaurateurs, publicans, and cafe owners are urging the next Prime Minister to implement a significant Value Added Tax (VAT) cut to avert further venue closures and protect youth employment. Industry research indicates that one in six businesses in the hospitality sector are at risk of closing within the next 12 weeks. This comes as Ireland is set to reduce its hospitality VAT rate from 13.5% to 9%.
Chef Tom Kerridge, a prominent voice in the campaign, is leading calls for the UK's VAT rate to be slashed from 20% to 10%. He argues that such a reduction would help businesses avoid closures, prevent job losses, and allow for price adjustments. "Hospitality isn't employing at the minute, it's stagnating, it's moving backwards, it's closing down," Kerridge stated. "Those jobs aren't there, and they're not available to young adults right now."
Kerridge, co-owner of the two-Michelin-starred gastropub The Hand & Flowers, hopes to raise public awareness through the UKHospitality campaign "VAT's The Problem," encouraging customers to sign a petition. He expressed optimism that Andy Burnham, a contender to replace Keir Starmer as Prime Minister, would be receptive to the idea of a VAT cut.
Operators cite a confluence of high operating costs, including energy, wages, National Insurance contributions, food, beer duty, and business rates, as major challenges. Industry groups, such as the British Institute of Innkeeping, UKHospitality, the British Beer and Pub Association, and HospitalityUlster, produced the research highlighting the precarious state of businesses. Their findings reveal that nearly a quarter of respondents (23%) are currently operating at a loss, an increase from 15% three months prior.
Business owners like Eamonn England and Arina Piskunova of The Windsor Castle in North London, recently recognized as best licensees in Britain, have already had to reduce operating hours and are struggling to hire new staff. "It's people at university or doing some kind of hospitality course, they are looking for their kind of start, their step up, for that upskilling. We need it, and they need it, but it just doesn't equate for us - we can't afford it," England said. They believe a VAT cut would enable them to hire an additional team member.
Nick Mackenzie, chief executive of Greene King, described a VAT reduction as a "double win," capable of reversing decline and fostering future growth. He expressed concern that businesses are being discouraged from hiring young, less experienced workers, thus depriving many of their initial job opportunities. "That's how people get confidence, that's how people end up having a career in our sector. If you lose that, then society's losing out and the economy's losing out," he added.
Thomasina Miers, co-founder of Wahaca, noted that increased employment costs, such as the National Insurance hike in April 2025, have made it "very expensive to employ real people." She questioned the taxation of labor-intensive industries in an era of increasing automation, advocating for reduced taxes on employment to make it more affordable for companies to hire.
Chef Mandy Yin, who was forced to close her restaurant Sambal Shiok in May, highlighted the broader impact. Her closure resulted in the loss of her £100,000 annual tax contribution and the jobs of 20 staff. She stated that the current system is unsustainable for independent operators without significant financial reserves.
Restaurant owners have also criticized government policies, including increases to minimum wages and National Insurance contributions, alongside higher business rates. The sector is further contending with a consumer spending squeeze influenced by rising household costs due to global events, and escalating ingredient and utility expenses.
While the government recently announced a temporary VAT reduction to 5% for children's meals, family admissions, and soft play areas between late June and early September, campaigners argue for a more widespread and permanent cut across the hospitality industry.