Urgent calls are mounting for a rule change in pubs and restaurants across England, as new figures reveal that one in six hospitality businesses is at risk of closure within the next year. The warning comes amid growing concerns over the tax burden imposed by the Labour Party government, with almost a quarter of hospitality businesses now operating at a loss.
Rising Losses and Closure Risks
According to the latest data, 23% of hospitality businesses are currently operating at a loss, a sharp increase from 15% just three months ago. Furthermore, 5% of businesses report that they are no longer viable at all. These statistics underscore the severe financial strain on the sector, which includes pubs, restaurants, hotels, and cafes.
The findings have prompted renewed calls for a reduction in hospitality VAT, with 89% of respondents in a recent survey backing a cut as the single most effective measure to save the sector. Chef Tom Kerridge has been leading the #VATsTheProblem campaign, advocating for a VAT reduction to 10%.
Chef Tom Kerridge Leads Campaign
Kerridge emphasized the urgency of the situation, stating: “This shows why we need hospitality VAT cut to 10%. Our hospitality culture in the UK is the best in the world, but we continue to be hit with unfair levels of tax. Just look across Europe. Almost every other country recognises the need to support hospitality with a lower rate of VAT. Now, Ireland becomes the latest. VAT is the problem – 10% is fair for hospitality.”
The campaign has gained traction as trade bodies warn of the devastating impact of the current tax burden. In a joint statement, they said: “We are seeing the devastating impact of hospitality’s heavy tax burden escalate before our eyes. The number of businesses now operating at a loss is accelerating rapidly and too many businesses are facing the gut-wrenching decision of whether they have to close their doors for good.”
Community and Economic Impact
Trade bodies highlighted the broader consequences of potential closures, noting that local pubs, restaurants, hotels, and cafes are integral parts of communities. “They create millions of jobs, drive growth on our high street and support cities, towns and villages. The loss of these businesses is more than just numbers on a spreadsheet, it tangibly impacts our society and our culture,” the statement added.
The organizations are calling on the Government to cut VAT to 10%, aligning the UK with the rest of Europe. They argue that this measure is “the most impactful way to support hospitality and drive growth.” Without intervention, the sector faces an uncertain future, with many businesses at risk of permanent closure.
