Why the government should cut hospitality VAT by 10%
We talk to businesses all the time. We talk in times of crisis and at moments of celebration. And we’ve never known a sector face such a crisis as hospitality is facing, with utter silence around it.
The crisis is overwhelming, multi-faceted and it is having an impact on everything from our high streets to the employment rates of our young people. It is one of the most critical economic issues affecting our towns and cities.
Since Covid, many hospitality owners say it feels like the water is getting too deep.
The pandemic itself was a once in a lifetime event. Hospitality had to close their doors, and then the stop / start re-openings impacted on cash flow and viability. We worked hard in Liverpool to embrace projects like Liverpool Without Walls, making areas like Bold Street and Castle Street pedestrianised, introducing Liverpool Restaurant Week and raising the profile of our hospitality sector.
But it wasn’t just the pandemic.
Hiring staff has become more expensive. Both NI and the minimum wage increase mean that bringing in new members of staff, especially part-time, costs more.
Business rates are higher (a system that needs radical, overdue overhaul)
Energy bills have increased substantially for businesses, just in the same way as they have for households.
Food and drink costs have gone up, just as they have for everyone, meaning the cost for cafes, bars and restaurants is more, just to keep their menu the same.
People have got smaller budgets themselves. The cost of living is hitting how often many people eat out. During Liverpool Restaurant Week we could see of the thousands who took up offers, a substantial percentage were for those wanting to visit higher end restaurants, like The Art School. People want to eat out, they just can’t afford to do it as much. Offers really make a difference. But you can’t run a business on offers everyday.
All this means that hospitality businesses have to work harder to stay in place. It costs more just to open the doors. They can’t just increase their own prices, many don’t have the cushion to absorb costs.
We are not talking about wealthy restaurateurs here. No one goes into hospitality to become a multimillionnaire! We are talking about local businesses.
VAT on hospitality is currently 20%, the second highest in Europe. Reducing this to 10% would give hospitality breathing space, allowing our vibrant businesses to stay open.
The hospitality sector is a crucial element of Liverpool’s visitor economy, now worth 36% of spend in the city centre, with one in ten jobs in city centre hospitality.
Since 2019, data from Beauclair shows the food and drink industry has increased in debit spend (how much people spend in venues) by 16.4%. Since the pandemic, the industry is growing 2.4% year on year. In 2025, that expenditure was £322,654,686. According to figures from Liverpool City Council, hospitality, equating to the food industry and accommodation, like hotels, equates to 9.3% of employment in Liverpool, 20,776 jobs.
Imagine if any other industry worth 36% of spend or one in ten jobs was being threatened in this way? There would be outrage and anger. The Prime Minister would be visiting to meet local leaders to say how important the industry was, how valuable and how he was working as hard as he could to protect those vital jobs.
Why isn’t that happening with hospitality? Why is it not taken as seriously as an employer, a tax paying industry, a vital ingredient in our visitor economies and tourism?
Cutting the cost of doing business would allow hospitality to hire more young people and stay on our high streets and in our city centres.
We risk pulling up the drawbridge on a generation of hospitality entrepreneurs and leaders if we continue to damage this vital industry.
