UK pub rates cut exposes VAT gap with Europe
A targeted UK business rates cut for pubs has exposed a deeper structural disadvantage for British hospitality compared to European rivals, as operators argue VAT, not property taxes, is the real threat to survival.
Andy Burnham has announced a 20% discount on business rates for pubs, social clubs and live music venues, building on emergency relief introduced in January.
The move, Burnham's third major policy announcement in three days, will save the average pub more than £1,000. Industry body UK Hospitality welcomed the intervention, noting that his enthusiasm for the sector "survived his trip down the M1".
However, the relief highlights a growing divergence in how the UK taxes hospitality compared to the rest of Europe. Operators argue that while property taxes are a burden, the UK's 20% VAT rate is the true barrier to competitiveness.
"The 20% drop in business rates is really just lip service, it won't affect whether we survive or not, the real lever to pull is help with VAT, dropping the rate from 20% to 10% as it is in the rest of Europe," said Sam Lamiroy of 45 Queen Street. Nick Smith of the Ludoquist cafe and bar also called for the government to reduce VAT to align with Germany, France, Spain and Italy.
British pubs are currently navigating a combination of rising employer National Insurance contributions, a higher minimum wage, inflation and climbing living costs. Keith Bott of Titanic Brewery estimates that 35-40% of pub turnover goes to the Treasury, though he feels the government is "finally recognising the plight of the hospitality industry and trying to help".
The narrow targeting of the relief has also created friction on high streets. Businesses that fall outside the strict definition of a pub fear being excluded, with Smith comparing the confusion to "the trauma of Covid days".
Non-hospitality firms are equally frustrated. Ruth Dawson of HD3 Fitness Centre argued that community leisure facilities providing health benefits were being ignored. "If a pub can get support because it is the 'heart of the community', then so should we," she said, warning that rates are "one of the biggest threats to our ability to keep operating".
Bott pointed to the wider disparity with e-commerce, noting that online retailers operating out of warehouses pay a "ridiculously low" amount of business rates. For a sector that serves as "a springboard into work" for young people, as Lamiroy noted, the piecemeal tax approach risks doing little to prevent permanent closures.
