“We are fighting a losing battle” - Scottish hospitality business owners call for VAT reduction in UK Budget
With the UK Budget taking place at the end of the month, Scottish hospitality owners are calling for VAT and national insurance reduction, as new analysis shows the cost of businesses closing.
As we wait for the UK Budget at the end of the month, Scottish hospitality business owners are laying out what they’d like to see announced, as new analysis by the Scottish Beer & Pub Association (SBPA) showed that 62 Scottish pubs closed during the first nine months of 2026, costing an estimated 585 jobs, including 330 held by under-25s, and more than £6 million in tax revenue.
Sean Weeraratna, managing director at the Montpeliers Group, Edinburgh said demand isn’t the problem: “Every pub or bar that closes is a business people were still walking into. The problem isn’t demand.
“It’s that the cost of keeping the doors open has outstripped what any operator can reasonably charge. Between employer National Insurance, rising wages, higher rateable values and 20 per cent VAT, roughly a third of every pound a customer spends goes straight back out in tax before we’ve paid for a single ingredient or a single member of staff.
“As an independent, we don’t have the deep pockets of the big hospitality groups, with sites across the UK to spread these costs. Every increase lands directly on our venues and our people.
“Despite that, we’re continuing to invest in Edinburgh, not just in relaunching Ricks on Frederick Street but across Tigerlily, Indigo Yard and Montpeliers Bruntsfield too. That investment is a real risk for an independent operator. If rising costs keep eating into margins and we can’t see a return, reinvesting becomes much harder to justify. That means fewer refurbishments, fewer new jobs and, ultimately, venues that can’t keep going.
“What we need is simple: a permanent cut in VAT for hospitality to bring us in line with most of Europe, a business rates system in Scotland that reflects what venues actually earn rather than temporary reliefs we can’t plan around, and breathing space on employment costs so we can keep hiring young people. Independents like us are the backbone of Scotland’s high streets, and we need governments on both sides of the border to give us a fighting chance.”
Martin Luney and Colin Church are the owners of leading Edinburgh-based bar operator and special events company, Big Red Teapot, which includes The Voyage of Buck on William Street in Edinburgh's West End and The Blackbird on Leven Street in Tollcross said: "What we really need is a reduction in the tax paid to run a business.
"We hire a disproportionately large number of younger, inexperienced people than other industries. This allows new enthusiasm, flexible working arrangements around study and new creative enterprises. Reducing the National Insurance for younger people would help encourage this employment for years to come.
"Echoing the majority of European countries - a reduction in VAT for hospitality venues would be a game changer. It would allow prices to stabilise, equipment replaced, more staff to be employed and struggling small businesses to thrive again.
"The idea that we're charged for the sale on food items and we can't claim back the cost of goods on that item as per most other industries is problematic."
Nick Watkins owner of El Perro Negro in Glasgow and Edinburgh added: “Firstly VAT should be brought down to 10 per cent, secondly we should be rejoining the single market and finally there needs to be a complete revision of energy bills for both commercial and domestic customers.
“Currently all SME’s are being strangled by UK gov policy (not just hospitality) unless you are a multi-national who can siphon money overseas via complex tax loopholes and very good accountants. We are fighting a losing battle.
“The current trajectory is totally unsustainable but I fear personal interests and egos will be the continued undoing of the country.”
Graham Suttle, owner of The Finnieston in Glasgow agrees that rates and costs are the main issues. He said: “Scotland is known around the world for its warmth and hospitality, but the businesses delivering that welcome are under enormous pressure. Catastrophic rises in costs, rates, rents and needless red tape are making it harder to keep doors open, protect jobs and invest.
“This Budget needs to deliver meaningful cuts to the cost of doing business. A reduction in hospitality VAT to 10 per cent would be a major step, and we need the Scottish Government to back that call and deliver support through its own Budget that business owners can feel day to day.
“If we want Scotland to fulfil its potential as a world-class tourism destination, we need to support the pubs, restaurants, music venues, events and experiences that make people want to come here. Small gestures won’t be enough. We need action that gives businesses room to breathe and confidence to invest in their future.”