- More than 800 hospitality businesses and leaders have backed calls to cut VAT from 20 per cent to 10 per cent.
- UKHospitality estimates measures announced in Labour's first two Budgets have added £6.8bn to businesses' costs.
- The industry is also facing a new visitor levy, higher employment costs and pressure on business rates.
Britain's hospitality industry is calling for an urgent cut in VAT as businesses face a growing list of higher costs and warn that more pubs, restaurants and hotels could close.
More than 800 businesses and industry leaders have signed an open letter to Prime Minister Andy Burnham calling for VAT on hospitality to be reduced from 20 per cent to 10 per cent.
The campaign brings together major pub groups including Greene King, Fuller's, Mitchells & Butlers and Wetherspoons, restaurant chains such as Franco Manca, PizzaExpress and Wagamama, hotel groups including Marriott and Best Western Hotels, and leisure businesses such as Center Parcs and Parkdean Resorts.
Many of the signatories are also small and medium-sized businesses, including independent pubs and hotels.
Celebrity chefs including Tom Kerridge, Angela Hartnett, Heston Blumenthal, Andi Oliver, Clare Smyth, Jason Atherton, Nathan Outlaw and Paul Ainsworth have also backed the campaign.
The industry says the pressure is becoming increasingly difficult to absorb. UKHospitality estimates that measures announced in Labour's first two Budgets have added £6.8bn to businesses' costs.
Those measures include £1.9bn from increases to the national living wage and national minimum wage, £1bn from higher employer National Insurance contributions, £500m from changes to business rates and £1bn linked to the Employment Rights Act.
The 2025 Budget added another £1.4bn through minimum wage increases and at least £1bn through changes to business rates, according to the industry.
Hospitality businesses say the result is already visible on high streets. Their letter warns that three hospitality venues are closing every day and that continued cost pressures will lead to further closures and job losses.
A 10 per cent VAT rate would bring the UK closer to the rates applied to hospitality in countries including France, Spain and Italy.
Tom Kerridge, who backed Labour at the 2024 general election, said the current rate was holding the industry back.
“The reality is that 20pc VAT is holding hospitality back. Hospitality is different from many other businesses because so much of what we spend our money on is our teams. You can reclaim VAT on a product, but you can’t reclaim VAT on a person. That makes a 20pc rate particularly tough for a sector where labour is one of our biggest costs.
“And this is all happening at a time when businesses are already dealing with rising wages, energy bills, food costs and business rates. We’re seeing the consequences, with businesses closing their doors every single week.”
Why the industry is turning to Burnham
The campaign is also putting pressure on Burnham because he previously supported a lower hospitality VAT rate.
In February, when he was mayor of Greater Manchester, Burnham said he would argue for a hospitality VAT rate in line with Europe because of the social value businesses bring to towns and communities.
He said at the time that he supported halving VAT because of “the social value that your businesses bring to places and towns that need that life injected into them”.
More than 370,000 people have since signed the #VATsTheProblem petition calling for a 10 per cent rate.
The industry is now demanding that the prime minister turn that previous position into government policy.
“We don’t need another promise. We need action,” Kerridge said.
The pressure has intensified following the government's decision to allow local authorities to introduce visitor levies on accommodation.
The new system will give local leaders the power to impose tourist taxes on hotels, holiday lets and bed and breakfasts. UKHospitality estimates the measure could add £1.6bn in costs to businesses.
The industry argues that the levy could make domestic holidays more expensive and damage tourism, investment and employment. Because the levy will be calculated as a percentage of accommodation prices rather than a flat charge, families travelling during school holidays could face larger bills when accommodation prices are already higher.
Hotels and tourism businesses have also raised concerns. Hilton UK & Ireland senior vice president Stephen Cassidy described the measure as a “catastrophic blow for the UK hotel sector that is already under significant pressure”.
Shadow chancellor Andrew Griffith said the visitor levy was another burden on businesses already facing higher employment costs, business rates, energy bills and regulation.
The government has defended the policy, arguing that it will allow local leaders to raise and reinvest money where it is needed.
A government spokesman disputed UKHospitality's estimate of the cost, saying its own analysis showed that the visitor levy would cost far less than claimed.
They said local authorities would consult before introducing a levy and would have to balance affordability for families with stability for businesses. The government also pointed to a £4.3bn package of business rates support for hospitality and retail.
The government is offering relief in other areas
The VAT campaign comes alongside some measures designed to support the sector.
The government has said it will work with publicans to give pub tenants more options and fairer terms following a review of the 2016 pubs code.
One proposal would allow tenants to move away from tied arrangements with pub companies and become “free of tie”, paying market rent while buying products from suppliers of their choice.
Other changes could allow pub companies and tenants to agree longer-term relationships.
The review found that fewer than 400 tenants applied for a free-of-tie agreement between April 2022 and March 2025, with some saying they had been deterred by the cost and complexity of the process.
Burnham's government has also previously announced a 20 per cent reduction in business rates for pubs, clubs and live music venues as part of a £100m support package.
But the industry's latest letter suggests those measures have not removed the pressure facing businesses.
Allen Simpson, chief executive of UKHospitality, said the visitor levy had undermined the government's claim that it wanted to support the sector.
“The Government says it wants to support hospitality, create jobs in every postcode and reduce the cost of living, yet this policy acts in opposition to all of those goals,” he said.
The government, meanwhile, argues that its wider support package and the flexibility being given to local authorities can help businesses and communities.
The disagreement leaves hospitality at the centre of a wider debate over how much tax businesses can absorb before the costs begin to show up in closures, prices and lost jobs.
For the industry, the immediate demand is clear: reduce VAT to 10 per cent. For the government, the question is whether it can afford to give up the tax revenue at a time when public finances remain under pressure.
And for Britain's pubs, restaurants, hotels and their customers, the stakes are increasingly visible on the high street and in the price of going out or taking a holiday.
