From today, July 1, hospitality businesses across the UK are asking customers to support #VATsTheProblem, a campaign calling on the government to cut hospitality VAT from 20 per cent to 10 per cent.
The campaign is spearheaded by chef and publican Tom Kerridge (The Hand & Flowers, Kerridge’s Bar and Grill at The Corinthia), and backed by industry organisations UK Hospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster. A petition in support of the campaign has already gathered more than 240,000 signatures at the time of writing, with a goal of reaching one million.
The aim is to bring the UK’s hospitality VAT rates closer in line with much of Europe, where lower VAT rates for hospitality are common (Germany pays 7 per cent; France and Spain pay 10 per cent), and give venues a better chance of surviving a period of mounting costs. At the moment, more than 20 venues close in the UK every week – recent high-profile London closures include Moro and Sambal Shiok.
The push comes as new survey data reveals the scale of pressure on the sector. Research conducted by hospitality research consultancy CGA by NIQ between May 19 and June 9, which included businesses operating more than 16,000 hospitality sites, found that almost a quarter of respondents are now operating at a loss, rising from 15 per cent to 23 per cent in just three months. Five per cent say their business is no longer viable, while one in six say they are at risk of failure within the next 12 months.
The campaign is about “the whole of hospitality”, Kerridge tells Broadsheet. “All the issues that drop into hospitality across the board are exactly the same, whether it is a local neighbourhood restaurant, whether it is pubs just around the corner, whether it’s a five-star hotel, a nice dining room, whether it’s a Michelin-star space, whether it’s a nightclub venue, whether it’s part of a late-night bar.”
He says the proposed 10 per cent rate “brings us in line with the rest of Europe and allows us a chance to operate as a collective force of survival”.
The timing of the campaign’s public rollout coincides with the date the Republic of Ireland is reducing its hospitality VAT rate to 9 per cent. “Almost every other country recognises the need to support hospitality with a lower rate of VAT,” says Kerridge. “Now, Ireland becomes the latest.”
Venues are being encouraged to download campaign materials, print posters, display QR codes and ask customers to sign the petition.
Over the past few years, hospitality businesses have been hit by rising utility bills, food inflation and National Insurance charges, as well minimum wage and business rate increases. Many say they have reached the limit of what can be passed on to customers through higher menu prices. “Those are the [costs] … that you can’t put onto the guests and consumers,” says Kerridge. “That’s eradicated any margin.”
Paul Ainsworth, the chef and restaurateur behind the Ainsworth Collection (Paul Ainsworth at No 6, Caffe Rojano, The Mariners) in Cornwall is on the same page. For him, a cut in VAT is a necessary release valve. “[This] doesn’t solve everything,” he tells Broadsheet. “You’ve still got National Insurance, you’ve still got business rates, which are sky high, the cost of raw materials, everything. But it does help. It would release some of the anxiety that you will find up and down the UK.”
Ainsworth, who employs 442 people, says that he has never seen such strain on the sector in more than three decades in the industry. “I’ve never seen it like it is now. Whether you’re doing wonderful pastries and lovely coffee, or whether you’re two, three Michelin stars, it’s really volatile and something has to change.”
He points to the fact that even well-known chefs are struggling. “If Tom [Kerridge] is struggling to make it work, how does that family, couple, person giving it a go on a high street or in a country pub, a village, how do they make it work? The reality is they’re not.”
Steve Alton, CEO of the British Institute of Innkeeping, says rising losses are forcing venues to eat into any safety net they may have. “Twenty-one per cent have no cash reserves left and 43 per cent have less than six months [of reserves], so two-thirds are in an incredibly precarious position.”
One of the campaign’s main arguments is that hospitality benefits society, beyond providing somewhere to eat and drink. Kerridge points out the role the sector plays in youth employment. “Hospitality offers one of those first [work] spaces for many different people.”
Ainsworth makes the same point. He says many of the people he has employed over the years never planned on working in restaurants permanently. “They are people that come down [to Cornwall] for the summer who are at university and then go on to be a school teacher or go into whatever sector,” he says. “They absolutely credit and love being in hospitality.”
Wahaca founder Thomasina Miers says there’s also value in the skills hospitality teaches. “We teach [staff] how to balance the books, how to run a spreadsheet, how to engage with people, how to turn up on time and how to run their own businesses so they can go on and do whatever they want in life.”
Miers believes diners often do not understand how tight restaurant margins have become.
“I don’t think the consumer realises just how crippling the taxes are,” she tells Broadsheet. “Of the cost of a [pork pibil] taco at the moment, what we’re paying to the Exchequer in taxes is £2, which means the profit we’re making in that one taco – which goes back into the business, goes back to people, into training, into just keeping our restaurants smart and tidy – is 20p. So the Chancellor takes £2, we take 20p, and we are doing all the heavy lifting.”
“This is not about us making more money,” Miers says. “This is about saving the industry, which is the most exciting industry in our country. It brings so many tourists in. The food that you get in big cities is extraordinary.”
Will a VAT cut make eating out cheaper? Not necessarily. What’s important, is that “it will allow the space to be here this time next year,” Kerridge says. “The 10 per cent of revenue coming back into businesses will allow them to survive.” After that, the benefit becomes growth. “It slightly oils the wheels, the pulse of growth, which then allows it to become a space that can move forward, can allow expansion, can allow employment, can allow creativity.”
Sign the petition here.
