By Chris Jewitt, CEO of Food and Drink North East
Why our hospitality sector is closing – and why the tax system has it backwards
There’s a roundabout on my local high street I have to navigate every morning on the school run. It is a masterclass in how not to plan a road.
The lanes are too narrow to begin with – a bus lane, a makeshift cycle lane, and two traffic lanes never built for our national obsession with enormous SUVs, all fighting for the same space. Then you reach the roundabout itself, take the left, and – STOP – a pedestrian crossing sitting right on the brow of it. Cars stop dead mid-roundabout.
It causes accidents and near-misses daily. It’s genuinely dangerous for the pedestrians and school children that it was presumably meant to protect, and it triggers crash-causing abrupt stops.
Every nonsensical element of that tragedy of traffic was probably signed off by someone sensible. Put together, it’s a brain fart.
Nobody stepped back and, with any user experience or critical thinking, asked whether the whole thing actually worked.
I think about that roundabout a lot as it stands as a metaphor for so many other areas of ill thought planning. And, at a national level, it’s exactly what we’re seeing with VAT and hospitality.
As part of my role at Food and Drink North East, I have the privilege of speaking to many, many business owners every week – small start-ups, agri-food enterprises, manufacturers, the entire farm-to-fork supply chain.
They’re all being absolutely hammered and have been for some time. Rising costs, tighter margins, harder decisions. But none are being hit as viscerally and as starkly as hospitality. You don’t have to take my word for it. Listen to the people living it.
Chefs like Kenny Atkinson of House of Tides, who has called the level of VAT on hospitality “so disproportionately wrong” and warned that what we’re watching is not growth, but managed decline.
Or content influencers like Laura Middleton, the face behind Geordie Scran, who champions these venues every week.
They’re all shouting about the same thing, and they’re right.
Because hospitality – be it pubs, cafés or restaurants – is something we all rely on. It is the beating heart of our economy, our communities and our lives.
Births, marriages, deaths. Staff nights out and quiet celebrations. The secret midweek pint. World Cups and derby days watched shoulder to shoulder. Quiz nights, first dates, leisure, pleasure, culinary greatness – whatever the occasion, we lean on this industry as an anchor.
And right now that anchor is aweigh.
Three hospitality businesses have closed every day since the beginning of 2026. This isn’t a slow decline. It’s a catastrophic collapse and is being baked in.
The number our European neighbours would find baffling
At the heart of it sits a figure that would shock our friends across the Channel: 20%.The UK’s VAT rate for hospitality is among the highest in Europe, second only to Denmark. France and Spain charge 10%; Germany, 7%.
Our operators compete on a pitch tilted steeply against them before they’ve served a single cover.
“But what about Denmark?”
There’s one obvious objection here, so let’s look at that in isolation.
Denmark taxes hospitality even harder than we do – a flat 25% on almost everything, restaurant meals and food included, with no reduced rates at all. Yet Danish hospitality thrives. So, does this kill our argument? Quite the opposite – it proves the point of being economically bold and progressive.
Denmark’s high rate isn’t bolted onto a broken structure; it’s one part of a coherent whole. That VAT funds a system that absorbs the very costs our operators carry directly on the P&L – training, healthcare, the wage floor. A Danish restaurateur pays more tax at the till, but isn’t simultaneously hit with our particular pile-up of business rates rising 15% in a single year, the end of Covid-era relief, and energy and National Insurance increases all landing at once.
Denmark made a whole-system choice and designed every part to fit.
We’ve done the reverse – slapped a top-of-the-table tax rate onto a punishing cost stack with nothing to compensate for either.
The lesson from Copenhagen isn’t that high VAT is harmless; it’s that tax only works when the entire architecture is built to fit together. Unfortunately, ours isn’t. And VAT is only the start of it. Layered on top is a stack of costs that reads less like policy and more like a sector being punished for existing.
Income tax rises that shrink the discretionary spend our venues depend on.
A national minimum wage increase that – however justified for workers – lands as pure cost on businesses already running on fumes.
A rise in business rates so steep it is frankly cynical and indefensible, falling on the very high-street premises we claim to want to save.
Duty piled on the drinks that keep a wet-led pub alive.
And now the spectre of a tourism tax, threatening to make our region more expensive to experience at the precise moment we should be making it more inviting.
Each measure can be defended in isolation. Put them together and you get exactly what I described at the start: a dysfunctional roundabout and an accident waiting to happen.
Atkinson’s own utility bills, he says, jumped from £20,000 to £55,000 a year. Where, exactly, is that money supposed to come from?
In fairness to government
The easy thing here is to join the pile-on. I’d rather be balanced about it: the risk averse Treasury isn’t being entirely irrational. A blanket cut is genuinely expensive – a 10% rate across food, drink and accommodation is expensive.
And there’s honest evidence that VAT cuts in the EU have shown limited pass-through to consumers, with businesses keeping the benefit to repair cashflow rather than dropping prices.
These are not people acting in bad faith. But here is where I think the understanding breaks down – and it’s the part the petitions don’t quite reach.
We’re not just taxing too heavily. We’re taxing the wrong things.
Our VAT system, almost by accident, punishes effort and rewards its absence. The chef who sources locally, butchers in-house, cooks from raw ingredients and employs skilled people pays the full 20% on every plate. Meanwhile a mass-produced ready meal, engineered for shelf life and shipped in from anywhere, frequently carries little or no VAT at all.
We have built a tax architecture that makes the worst food cheap and the best food expensive. Then we wonder why our high streets empty and our diets decline.
This is why what’s needed is a reset, not a reshuffle. Trimming here, extending a relief there, or another temporary scheme to hobble through to the next fiscal crisis – we’re constantly reshuffling a broken deck.
A reset means inverting the logic entirely. Tax should rise with industrial scale and processing, and fall with skill, provenance and quality. Reward the businesses making the effort – sourcing regional ingredients, applying craft, putting good, healthy food on the plate – with a low or zero rate. Let mass production and ultra-processing carry more of the load.
Keeping value in the supply chain
The reward here is bigger than saving restaurants and protecting independent businesses. It’s about stimulating the whole farm-to-fork economy and making sure value stays in the supply chain rather than leaking out of the region.
When a chef buys from a local farm, that money circulates – the farmer, the abattoir, the wholesaler, the maker, the wage that gets spent back on the high street.
When a supermarket sells a ready meal assembled three countries away with ingredients from all corners of the world, the value leaves the North East and doesn’t come back.
A tax system that favoured the former over the latter wouldn’t just rescue hospitality; it would rebuild a regional food economy from the ground up.
That is alignment with everything every government department claims to want: better health, stronger local economies, a thriving British food sector.
The architecture Whitehall is missing
And underneath all of it sits the real absurdity: this country has no joined-up food strategy.
For the single most important thing we have – the thing that feeds us, sustains us, lets us thrive, and ties directly into food security and sovereignty, public health, tourism, sustainability, high-street regeneration, you name it – we have developed no coherent plan even after the optimistic days of Henry Dimbleby’s National Food Strategy.
And whatever might be going on behind the scenes, they are certainly not consulting with the right people to design a solution.
We seem to carry a kind of national cognitive dissonance about food: we know it matters more than almost anything, and we treat it as if it matters less than almost anything. This is the connection I’m not sure is understood.
Hospitality is not a discretionary consumer line that flexes with the economy. It is the frontline of the entire regional food system. What government fails to see is the Matrix-level connectivity of this sector – how much more it determines than the meal on the plate.
It creates entry-level jobs and career pathways.
It builds routes to market for local suppliers and producers.
And it delivers some social solutions too: the local pub is a safe space, a positive act against loneliness and isolation, quietly doing work an overstretched healthcare system simply cannot.
If producers provide the colours on the palette, then hospitality is the artist holding the brush. And tourism leans on it entirely – though we’ve got the formula backwards. Too often we see tourism-led hospitality, where venues are pressured to reshape themselves around what visitors are assumed to want. It should be the other way around: hospitality-led tourism, where people come to us because what we already have is great.
Authenticity is the draw and in the North East, we have that in spades – for now. Bend the offer to chase the footfall and you lose the very thing worth travelling for.
So when a restaurant closes, the loss never stops at its own front door. It takes the order from the local brewery with it, the contract with the farm, the wholesaler, the baker, the cheesemaker. The pub on the corner is the last link in a chain that runs all the way back to the field.
You cannot champion local food production while taxing its biggest customer out of existence.
We saw what’s possible when the rate came down during the pandemic: it stimulated demand and generated revenue.
Empty premises generate nothing. More than 2,000 hospitality businesses are predicted to close in the UK in 2026, with job losses that could run well into six figures once you apply the supply-chain multiplier.
What’s really at stake
So let’s be clear about what we lose with each closure.
These are the employers, the apprenticeships, the reason a town centre has life after six o’clock – and the buyers who keep our farmers and producers going.In a region like ours, where food, drink and hospitality is woven into our identity and our economy, every closure is a hole that’s getting harder to fill.
I know I’m just another voice playing the same record – saying little my peers haven’t already said, and said well. But as the CEO of an organisation that represents the whole chain from farm to fork, I think it’s critical to keep reminding this country’s decision-makers how existentially critical it is to get this right.
And this is not just an opinion.
When we run consultations across our business community, a reduction in VAT consistently comes back as one of the most prominent recommendations – the single lever members point to as having the most direct, positive impact on their trading conditions.
This isn’t a lobbyist’s talking point – it’s what the businesses doing the work are telling us, again and again.
Day by day I’m watching sad and avoidable business casualties that cannot find an escape door. These are not failures of effort or talent. The rises in costs simply cannot be passed on when consumers are being squeezed everywhere else at the same time. So the government needs to be bold and progressive, and stop tweaking around the edges of the status quo.
We need to back the voices of our local hospitality industry, and back the recommendations put forward by organisations like UK Hospitality to cut VAT to 10% – before the daily casualties tip over into a full business-closure pandemic, and we find ourselves mourning what we could so easily have saved.
The good news is there is now something concrete to get behind.
As of June 2026, chef Tom Kerridge is spearheading #VATsTheProblem – a sector-wide campaign with a single, clear ask: cut hospitality VAT to 10%, in line with the rest of Europe. It is backed by UK Hospitality, the British Beer and Pub Association, the British Institute of Innkeeping and CODE Hospitality, and it is aiming for a million signatures ahead of a full consumer launch on 1 July.
This is exactly the unified voice the sector has needed.
If you run a venue, employ a team, or simply care about the future of your high street, add your name and share it: vatstheproblem.co.uk.
Signing is the first step; the second is making sure your own MP hears it directly.
We’ve put together a ready-to-use template letter for exactly that – download it here, add your details, and send it.
Download: Write to Your MP
We don’t need another reshuffle. We need a reset.
Chris Jewitt is Founder and CEO of Food and Drink North East (FADNE), the region’s farm to fork organisation representing more than 500 food, drink and hospitality businesses across the region. A co-host on the Local Heroes podcast, he also sits on DEFRA’s Food and Drink Sector Council.
