Reeves Signals Support for Hospitality as Industry Presses for Further VAT Reform

Chancellor Rachel Reeves has sought to reassure hospitality operators that the sector remains central to the Government’s economic growth agenda, telling industry leaders that she believes the industry’s future prospects are positive despite ongoing challenges.

Addressing delegates at a UKHospitality event via video link, the Chancellor praised the contribution made by pubs, restaurants, hotels and other hospitality businesses, describing them as vital to communities and the wider economy.

Reeves said hospitality businesses are often among the first to benefit when consumer confidence improves and stressed that boosting economic confidence remains a key priority for the Government.

The Chancellor pointed to a number of measures she said had been introduced in response to long-standing industry concerns, including business rates support worth an estimated £900 million, changes to draught duty arrangements designed to benefit pubs, and forthcoming reforms to apprenticeship funding.

She also highlighted the Government’s recently announced Great British Summer Savings Initiative, under which VAT on meals purchased for customers under the age of 18 will be reduced from 20% to 5% between 25 June and 1 September. Ministers hope the temporary measure will encourage families to eat out during the summer period while providing additional support to hospitality operators.

The announcement comes at a time when pressure is mounting on the Government to introduce wider VAT reforms for the sector. Campaigners behind the VAT’s The Problem initiative, led by chef Tom Kerridge, are calling for a reduction in hospitality VAT rates to bring the UK more closely into line with those applied in several European countries.

The campaign has gained significant traction since its launch, attracting over 206,000 signatures in support of lower VAT rates for hospitality businesses.

Responding to the summer VAT initiative, UKHospitality Chair Kate Nicholls welcomed the move, describing it as a positive development while maintaining that more comprehensive and permanent VAT reform remains necessary to strengthen the sector’s long-term competitiveness.

The industry continues to face significant cost pressures. UKHospitality estimates that measures introduced across the Government’s two most recent Budgets have added around £7 billion in tax-related costs to hospitality businesses. The organisation has also argued that increases in employer National Insurance contributions have contributed to substantial job losses across the sector.

She called on the industry to continue working closely with Government to support economic growth, adding that a thriving hospitality sector would play an important role in strengthening the wider UK economy in the years ahead.