Northern Ireland’s hospitality and tourism sector, employing nearly one in 10 workers and generating close to £2 billion in value annually, stands at a critical turning point.
Rising costs, shrinking margins, and an increasingly uneven competitive landscape with the Republic are pushing the industry toward crisis.
To combat this, Hospitality Ulster is calling for a five-year reduced VAT pilot to restore competitiveness and stabilise the sector’s future.
Hospitality underpins four out of five tourism jobs and is one of Northern Ireland’s most locally rooted industries. Its economic value circulates within the region through local employment, suppliers, and procurement.
As part of a single-island tourism destination, Northern Ireland should benefit from its position beside an EU state, but divergent tax regimes have turned this into a weakness.
The UK’s 20% VAT rate places the region at a stark disadvantage compared with the Republic, where the rate is currently 13.5% on accommodation and food and will fall to 9% on food in July 2026.
Ulster University analysis shows that, for a 100-person event at £90 per head, a southern venue can save £430-£750 in VAT. Accommodation providers in the Republic enjoy annual advantages ranging from £71,000 for a guest house to over £500,000 for a hotel.
With customers able to cross the border within minutes, even small differences determine where weddings, events, tours, and overnight stays are booked.
Almost all European tourism economies operate reduced VAT rates for hospitality, averaging about 10%. The UK is now an outlier, and Northern Ireland suffers most from this divergence.
Leading brands have lost over £1 million in confirmed international business due to VAT disadvantage; border-county venues have seen revenue fall by similar amounts; and restaurants report VAT liabilities exceeding operating profits.
Under the Northern Ireland Protocol, the UK Government can introduce a reduced VAT rate for the region. Economic modelling shows that while VAT receipts would initially dip, they would recover within two to three years through increased demand, turnover, and employment.
A five-year pilot would restore all-island competitiveness, support local jobs, stimulate investment, and offer evidence for future UK-wide policy. Such a measure would allow Northern Ireland to match Ireland’s reduced rates in the interests of fair competition.
This is not a request for special treatment but a call for fairness in a unique cross-border market. Crucially, while VAT reductions are typically designed to be passed on to consumers, the immediate priority for many operators would be simple survival, and there is no better time of year to be reminded of the importance of that survival than the Christmas season.
Christmas represents the best of what hospitality is all about: connection, community, and celebration.
Enjoy yourself, get out, support local venues, and spend time with friends. Every visit helps sustain the businesses that help make Northern Ireland vibrant and welcoming year-round.
- Colin Neill is chief executive of Hospitality Ulster
