If you run a pub, restaurant, hotel or bar, you already know the number. 20%. It's the slice of every sale that goes straight to the Treasury before you've covered a single ingredient, wage or energy bill. What you might not know is quite how much of an outlier that makes Britain - and why one of the country's most respected chefs has turned it into a national campaign.
This is everything hospitality operators need to know about VAT's the Problem, the numbers behind it, and - because awareness alone won't fix a P&L - what you can actually control while the politics plays out.
What Is "VAT's the Problem"?
VAT's the Problem is a nationwide campaign fronted by chef and publican Tom Kerridge, owner of the two-Michelin-starred Hand & Flowers in Marlow, calling on the UK government to cut hospitality VAT from 20% to 10%. It launched with a public petition in the summer of 2026 and is backed by a coalition of the industry's heaviest hitters.
The campaign's premise is deliberately simple, and Kerridge has been explicit about why: he wants hospitality's entire, fractured sector rallying behind one ask instead of dozens of competing ones. In his words, this is the first time every part of hospitality has had a single issue that hits every single one of them, "whether you're a coffee shop or a small independent restaurant or a five-star hotel."
Within eight hours of launch, the petition had passed 40,000 signatures. Within days, it had passed 100,000. At last count it had cleared 299,000 - on its way to a declared target of one million.
The Numbers That Explain the Anger
20% — the UK's standard VAT rate, applied in full to food, non-alcoholic and alcoholic drinks, and hotel accommodation.
12.8% — the average VAT rate charged on hospitality across Europe, according to UKHospitality.
7% — Germany's hospitality VAT rate.
10% — the rate in France, Spain and Italy.
2nd highest — where the UK's hospitality VAT now ranks in Europe, behind only Denmark.
19.3% — the OECD average standard VAT rate, which shows just how far above "normal" the UK's hospitality-specific rate sits, given most comparable economies apply a reduced rate to food service and accommodation rather than the full headline figure.
~2 pubs a day have closed since the start of 2026, according to hospitality market data.
21 businesses a week is the number Kerridge believes could be saved by a VAT cut to 10%.
£140 billion — annual revenue generated by UK hospitality, which also supports roughly 3.5 million jobs and pays around £54 billion back to the Exchequer in tax.
79% — the proportion of the British public who back a reduced VAT rate for hospitality and tourism, per YouGov polling commissioned by UKHospitality.
£17 billion — the Treasury's own estimate (given in a Parliamentary answer in February 2026) of what a 5% VAT rate across all accommodation and food and beverage services would cost the Exchequer. It's the clearest indication yet of the scale of the ask, and why the Treasury is the hardest audience to move — even as government ministers privately concede a cut would stimulate growth.
Put together, that's an industry contributing nearly £200bn to the UK economy between revenue and tax, being taxed at a rate that even the OECD average doesn't come close to matching for this sector, while losing roughly two venues a day.
Kerridge's Case: "A Small, Short-Term, Painful Hit" for Long-Term Growth
Kerridge has been candid that this isn't a campaign built on outrage alone. He's spoken directly with the Business and Trade Secretary and the Culture Secretary, both of whom he says agree a VAT reduction is needed - the resistance, he's said, comes from convincing the Treasury.
His argument leans on the government's own actions as evidence: the temporary cut to 5% VAT on children's menus and family attractions over summer 2026 already shows Whitehall accepts VAT is, in his words, a stimulant to growth. His pitch to the Treasury is a trade-off: a short-term revenue hit in exchange for a sector that reinvests, hires and stops bleeding venues at a rate of roughly 21 businesses a week.
It's a message he's taken from Downing Street to the Newsnight sofa, and one echoed by UKHospitality chief executive Allen Simpson, who has called a VAT cut to 10% the single most impactful lever government could pull for hospitality, jobs and the high street.
Our Take: The Campaign Is Right, But Operators Can't Wait for Westminster
Here's the uncomfortable part nobody running a venue wants to hear: VAT's the Problem is very likely correct on the economics, and it may still take years, not months, to win.
Government has already put a price tag on a full cut — £17 billion — and priced that against a Treasury that is, by its own account, trying to raise £190 billion in VAT this year alone. Political will and fiscal reality are not currently pointing the same direction. Even Kerridge, who has spent the year in direct dialogue with cabinet ministers, has publicly said he feels let down by the pace of progress. That's not pessimism, it's realism from the person at the negotiating table.
That doesn't mean the campaign isn't worth backing - it absolutely is, and every operator should sign the petition and keep the pressure on. But it does mean the sensible move for any venue right now is to stop treating VAT reform as a rescue plan and start treating it as a bonus, if and when it lands. Margin has to be found elsewhere in the meantime, because the businesses closing at a rate of two a day aren't waiting for a Budget announcement.
That's the real lesson buried in the VAT's the Problem numbers: hospitality has almost no control over the 20% that leaves through the till. What it does still have control over is everything on the other side of the ledger.
A note from Liquid Market...
For most venues, drinks procurement is one of the largest, least scrutinised costs on the ledger side.
Most venues have never competitively tendered their drinks supply. They're on legacy pricing, inherited supplier relationships, or deals that haven't been benchmarked in years - while VAT, energy, rates and wages have all moved against them.
In a world where a government-level fix is genuinely £17bn and several years away, finding any % back on drinks costs this quarter isn't a nice-to-have. It's a must.