UK hospitality leaders are intensifying pressure on the Government to cut VAT, arguing that a high tax burden is leaving restaurants, pubs and bars under severe strain. The campaign has gained urgency after new figures showed almost a quarter of venues are operating at a loss, underscoring how weak demand, rising costs and policy uncertainty are squeezing the sector.

Hospitality warns of deepening losses

Industry figures cited in the “VAT’s the problem” campaign indicate that many venues are struggling to break even, despite the sector’s importance to jobs, high streets and local supply chains. Leaders including chef Tom Kerridge are calling for VAT to be reduced from 20% to 10%, saying the current rate is making it harder for businesses to absorb higher wages, energy bills and wider operating costs.

The lobbying effort comes at a time when UK business confidence has weakened sharply, with the Institute of Directors’ sentiment index falling to minus 61 in June, according to the same report. That points to a broader slowdown in confidence across the economy, but hospitality appears particularly exposed because it is both labour-intensive and highly sensitive to consumer spending.

Why the tax debate matters now

Supporters of a VAT cut say the measure could improve margins, help venues avoid closures and encourage investment in staff and premises. They also argue that relief would support employment in an industry where profitability can disappear quickly when footfall softens or input costs rise.

The case for intervention has been strengthened by warnings that a large share of venues are already making losses. For operators, the issue is not simply profitability but survival, with many facing a combination of elevated costs, fragile demand and uncertainty over future policy.

Pressure on ministers

The Government has not signalled an immediate shift on VAT, but the latest campaign adds to the political pressure over the health of the high street and the cost of doing business. Hospitality groups are trying to frame the tax debate as a wider economic issue, arguing that sector support would feed through to jobs, supplier revenues and consumer choice.

Analysts will watch closely for any response from ministers, especially as the summer period is usually important for pubs, bars and restaurants. With confidence weak and losses mounting, hospitality leaders are warning that inaction could accelerate closures and deepen the strain on the sector.

• Almost a quarter of hospitality venues are reportedly operating at a loss.
• The campaign is calling for VAT to be cut from 20% to 10%.
• Business confidence has fallen sharply, with the IoD index at minus 61 in June.