In a rallying cry for the beleaguered hospitality sector, four prominent British chefs are advocating for a substantial reduction in the value-added tax (VAT) rate for pubs and restaurants, calling for it to be lowered to 10%. This appeal comes as they highlight the unprecedented challenges facing the industry, which have been exacerbated by rising costs and changing consumer behaviour.
A Call for Change
Top chefs including Tom Kerridge, Yotam Ottolenghi, Ravneet Gill, and Simon Rogan expressed their concerns during a segment on BBC Newsnight, revealing that the current climate in the hospitality industry is the most challenging it has ever been. “We’re not making any money whatsoever, and we’re just keeping our heads above water,” Rogan lamented, stressing the urgent need for government intervention. Kerridge echoed this sentiment, stating that taxation policies are misaligned with the realities faced by businesses in the sector.
The chefs are not alone in their struggle; they represent a broader trend of hardship within the hospitality industry, which has faced significant obstacles since the Covid-19 pandemic. With the war in Ukraine driving energy prices up and a cost-of-living crisis affecting consumer spending, many establishments are teetering on the brink of closure. According to UK Hospitality, three businesses are failing every day, underscoring the urgent need for reform.
The VAT Burden
Currently, the standard VAT rate in the UK stands at 20%, one of the highest in Europe, only trailing Denmark. This high rate places considerable strain on hospitality businesses, which are calling for a reduction to align more closely with rates in other European countries—Germany (7%), Ireland (9%), and France, Italy, and Spain (10%).
“Every pound we earn sees a significant portion go to the government in taxes,” Ottolenghi explained, highlighting the crippling financial pressure faced by restaurant owners. He argued that a VAT cut would not only alleviate some of this burden but also enable businesses to reinvest in their operations and employees.
Kerridge, who operates multiple restaurants and pubs, pointed out that various escalating costs—such as increased National Insurance contributions, rising business rates, and escalating minimum wage requirements—add to the financial woes. He warned that businesses can no longer simply pass on rising costs to customers, as doing so risks alienating patrons.
The Future of Young Workers
The hospitality sector serves as a vital entry point into the job market for many young people, employing 28% of individuals aged 18 to 20, according to the Institute of Fiscal Studies. However, opportunities are dwindling, with a recent report revealing that over one million young people are currently not in education, employment, or training—the highest figure in more than a decade.
The government has announced plans to create 300,000 work experience and training placements across various sectors, including hospitality. However, industry leaders argue that reducing employment costs is essential to attract young workers back into the sector. “We need policies that make it economically viable to hire young talent again,” said Allen Simpson, CEO of UK Hospitality.
Rogan added that during tough times, investments in young people and sustainable practices are often the first casualties. “When restaurants are under pressure, the things that matter most are the first to go,” he noted.
Government Response and Support
While the chefs have articulated their frustrations, Cabinet minister Pat McFadden acknowledged the government’s efforts to support businesses while also balancing the need for tax revenue. He stated that while the government is continuously lobbied for tax cuts, these decisions must be weighed against increasing public expenditure demands.
Last week, Chancellor Rachel Reeves announced a temporary VAT reduction for specific sectors, including children’s meals in restaurants, dropping from 20% to 5% during the summer holidays. However, Gill dismissed this move as inadequate, suggesting it risks creating loopholes and failing to deliver genuine support to the hospitality industry.
Why it Matters
The call for a VAT cut reflects a broader concern about the sustainability of the hospitality sector, which is foundational to both the economy and the social fabric of communities. As restaurants and pubs continue to close their doors, the potential loss of jobs for young people and the erosion of vibrant local cultures are at stake. Addressing these challenges through targeted tax reforms could not only help businesses survive but also foster a resilient workforce that supports economic recovery and community engagement.
