Nearly one in four pubs and restaurants across Britain are now operating at a loss as hospitality businesses grapple with rising costs and higher taxes, according to new survey findings.
The research from UKHospitality, the British Beer & Pub Association, the British Institute of Innkeeping and Hospitality Ulster shows that 23 percent of venues are losing money. That marks a sharp increase from 15 percent just three months ago.
Closures and financial pressures
The industry has continued to see businesses close, with an average of two pubs shutting permanently every day since January 2026, the survey found. One in six hospitality businesses fear they could close within the next 12 months, while five percent of operators said their business is no longer financially viable.
Industry leaders say the sector is facing growing pressure from higher tax bills, increasing operating costs and rising business rates.
Campaign for VAT reduction
Celebrity chef Tom Kerridge has launched his #VATistheproblem campaign, calling on the Government to reduce VAT for hospitality businesses from 20 percent to 10 percent. The petition has already attracted more than 240,000 signatures.
Kerridge, who owns the two Michelin-starred gastropub The Hand & Flowers, said reducing VAT would provide struggling businesses with much-needed support while bringing Britain's tax regime more closely into line with many European countries. "Our hospitality culture in the UK is the best in the world, but we continue to be hit with unfair levels of tax. Almost every other country recognises the need to support hospitality with a lower rate of VAT," he said.
The campaign has received backing from UKHospitality, the British Beer & Pub Association and the British Institute of Innkeeping. Britain currently applies a 20 percent VAT rate to food, drinks and hotel accommodation, making it one of the highest rates in Europe. France, Spain and Italy each apply a 10 percent VAT rate to their hospitality sectors.
Treasury concerns and political support
Treasury estimates suggest reducing VAT from 20 percent to 10 percent would cost between £10.5 billion and £12 billion each year. The projected cost has become one of the main obstacles to implementing the proposal, although some politicians have previously expressed support for examining the policy.
Andy Burnham, who has been linked with ambitions to become prime minister, has previously backed bringing Britain's hospitality VAT rate more closely into line with those across Europe. However, questions remain over whether he would introduce such a policy if he were to become prime minister, with his team declining to commit to the proposal.
The Treasury has so far rejected calls for a sector-specific reduction in VAT. The Government has previously faced criticism over temporary VAT measures, including a short-term reduction on children's meals, which hospitality operators argued did not go far enough to address the financial pressures facing the industry.
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July 02, 2026
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