More than 800 of Britain's leading pubs, hotels, and restaurants have urged Prime Minister Andy Burnham to reduce hospitality Value Added Tax (VAT) from 20% to 10%, warning that current tax levels are leading to business closures and job losses.
The campaign, organized under the #VATsTheProblem initiative, comes as Burnham prepares to host business leaders at Downing Street, aiming to portray his government as a "partner for growth." The businesses are demanding clarity on when Burnham intends to implement his previously stated support for a lower VAT rate.
Prominent figures and establishments backing the call include celebrity chefs Heston Blumenthal and Tom Kerridge, as well as major chains like Bill's, Franco Manca, PizzaExpress, and Wagamama. Large pub and brewing groups such as Fuller's, Greene King, Robinsons Brewery, and Wetherspoon's, along with hospitality giants like Center Parcs, Haven, and Marriott International, have also signed the letter.
The signatories argue that a lower VAT rate could revitalize struggling high streets, transforming closures into openings and lost jobs into new employment opportunities. The #VATsTheProblem petition has garnered over 370,000 signatures, advocating for a 10% VAT rate for hospitality to align with the European average.
While Burnham has previously supported a VAT cut to 10%, his recent focus has shifted towards business rates, including a commitment to a 20% reduction for pubs and music venues. However, hospitality leaders contend this is insufficient, with VAT remaining a significant financial burden.
A UKHospitality survey indicated that 16% of hospitality businesses are at risk of failure within a year, and nearly a quarter are operating at a loss. The survey also found that 89% of businesses believe a VAT cut would be the most effective support measure.
TV chef Tom Kerridge stated that the current 20% VAT rate hinders the sector, particularly given that labor costs are a major expense for hospitality businesses. He noted that VAT can be reclaimed on products but not on staff, making the high rate especially difficult. Kerridge highlighted that businesses are already contending with rising wages, energy costs, food prices, and business rates, leading to weekly closures.
UKHospitality has reported that nearly 100,000 hospitality jobs have been lost in the past two years, disproportionately affecting young and part-time workers. Official Treasury estimates suggest that reducing VAT on accommodation, food, and drink services from 20% to 10% would cost the Exchequer approximately £10.5 billion in the 2026/27 fiscal year.
The campaign is supported by industry organizations including UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping, and Code Hospitality. This push for a VAT reduction follows a temporary VAT cut to 5% for specific items like children's meals and summer attractions, which was in effect from June 25 to September 1.