“VAT’s The Problem” Campaign: Why UK Hospitality Is Reaching A Tipping Point

The UK hospitality sector is once again at the centre of an urgent national debate, as leading chefs, business owners, and trade bodies unite behind a new campaign calling for a reduction in VAT from 20% to 10%.

Spearheaded by high-profile chef Tom Kerridge, the “VAT’s the Problem” campaign highlights what many within the industry describe as a widening gap between the financial pressures faced by hospitality businesses and the tax framework under which they operate.

A sector under mounting pressure

Recent survey data paints a concerning picture: nearly a quarter of UK pubs, bars, and restaurants are now operating at a loss, with financial strain increasing rapidly over a short period.

In just three months, the proportion of businesses losing money has risen from 15% to 23%. Even more alarming, industry analysis suggests:

• 1 in 6 businesses risks closure within 12 months

• 5% are already deemed not financially viable

These figures reflect a sector operating on extremely thin margins, where even small shifts in cost pressures can determine survival.

The compounding cost crisis

Hospitality leaders argue that VAT is only one part of a wider structural challenge.

Recent increases in employer National Insurance contributions, rises in the National Minimum Wage, persistent inflation, and escalating energy costs have combined to place sustained pressure on operators across the country.

For many businesses, the cumulative effect has significantly eroded profitability, particularly in smaller, independent venues that lack the economies of scale enjoyed by larger groups.

The VAT debate: 20% vs 10%

At the heart of the campaign is a call to reduce VAT on hospitality services from 20% to 10%, bringing the UK more in line with several European counterparts.

Industry comparisons highlight notable differences:

• France, Spain, and Italy: ~10% VAT on hospitality services

• Germany: 7%

• Republic of Ireland: reduced rate of 9% for food-led businesses

• UK: 20%

Supporters of the reduction argue that a lower VAT rate would provide immediate relief to businesses operating under severe financial strain and help stabilise a sector that contributes significantly to employment, tourism, and local economies.

However, the policy is not without debate. Some economic commentators, including think tanks such as Tax Policy Associates, have raised concerns that a VAT cut could disproportionately benefit larger operators and represent a significant fiscal cost to the Treasury—estimated between £10.5bn and £12bn.

A unified industry voice

Despite differing economic perspectives, there is strong alignment within the hospitality sector itself. The campaign is supported by a broad coalition of industry figures, including:

• Thomasina Miers (Wahaca founder)

• Nick Mackenzie (CEO, Greene King)

• Ravneet Gill (chef and restaurateur)

Together, they argue that the current tax burden is unsustainable and that urgent intervention is needed to prevent further closures.

As Kerridge has stated, the UK’s hospitality culture remains world-leading—but is increasingly constrained by structural cost pressures that are out of step with international norms.

The road ahead

The “VAT’s the Problem” campaign will be formally launched with a nationwide push encouraging customers to sign a petition supporting the proposed VAT reduction. The goal is to demonstrate public backing for a policy change that industry leaders believe is critical to long-term survival.

Whether or not the government acts, the message from the sector is increasingly clear: without meaningful reform, more businesses will face the difficult decision of closing their doors for good.

At AGS Group, we continue to monitor developments across the hospitality sector closely, recognising the wider operational pressures impacting businesses nationwide and the importance of sustainable support frameworks for the industry’s future.