New research reveals that UK pubs and restaurants collectively lost £1.2 billion in the last financial year, intensifying the campaign for a reduction in VAT for the hospitality sector. The British Beer and Pub Association (BBPA) and UKHospitality released the data, showing that 58% of hospitality businesses reported a decline in profits compared to the previous year.
The losses come despite the sector's total revenue reaching £93 billion in 2025, up 4% from 2024. However, rising costs—including energy, food, and wages—have squeezed margins. According to the BBPA, the average pub made a profit of just £0.02 per pint sold, down from £0.05 in 2024.
VAT Cut Campaign Gains Momentum
Industry groups are renewing calls for the government to reduce VAT from 20% to 12.5% for hospitality businesses, arguing that it would provide a much-needed lifeline. Emma McClarkin, chief executive of the BBPA, said: “The current VAT rate is crippling pubs and restaurants. A cut to 12.5% would save thousands of jobs and help businesses invest in their future.”
UKHospitality estimates that a VAT cut would inject £3.5 billion into the sector over three years, supporting 200,000 jobs. The campaign has gained cross-party support, with 120 MPs signing a parliamentary motion urging the Treasury to act.
Impact on Employment and Investment
The research also highlights the human cost of the downturn. Over 15,000 hospitality jobs were lost in 2025, and more than 1,200 pubs closed permanently. Kate Nicholls, chief executive of UKHospitality, warned: “Without intervention, we could see another 3,000 venues shut their doors next year.”
Investment in the sector has also stalled. Capital expenditure fell by 12% in 2025, as businesses prioritised survival over expansion. The BBPA noted that only 35% of pubs plan to invest in renovations or new equipment in 2026, compared to 52% in 2024.
Government Response Under Scrutiny
The Treasury has so far resisted calls for a VAT cut, citing the need to reduce the national deficit. A spokesperson said: “We recognise the challenges facing hospitality, but we must balance support for businesses with fiscal responsibility. The government has provided £5 billion in business rates relief and energy bill support since 2023.”
However, critics argue that these measures are insufficient. Tom Stainer, chief executive of the Campaign for Real Ale (CAMRA), said: “Business rates relief helps, but it doesn't address the fundamental issue of VAT. Pubs are paying more tax than they can afford, and it's driving them out of business.”
The Treasury is expected to announce its decision on the VAT cut in the autumn budget, with industry groups planning further lobbying efforts in the coming months.
