A quiet revolution is sweeping through Britain’s restaurants, cafes and barbershops. It is not a shift in tastes or a new menu trend, but the creeping arrival of the American tipping culture. From London gastropubs to Manchester bistros, the ‘optional service charge’ – once a rarity – has become a standard line on bills, often set at 12.5% or 15%. But the Treasury has now raised the alarm, warning that this practice risks stoking inflation in the service sector and hitting household budgets just as the cost of living crisis begins to ease.
Official figures obtained by this newspaper show that the proportion of hospitality transactions including a gratuity has doubled in the past year. In some high-end London restaurants, the ‘suggested tip’ now appears on card machines before customers have even tasted the food. The Treasury’s internal analysis, seen by our reporters, concludes that if this trend continues it could add 0.4 percentage points to measures of core services inflation by next spring. That may sound modest, but for a government desperate to show it has inflation under control, every decimal point matters.
The mechanism is simple: as more businesses embed tips into prices, they become sticky. Unlike a cash tip in a jar, a percentage charge on a card is psychologically easier to accept and harder to remove. Over time, employers may factor these gratuities into base wages, reducing the need to raise salaries in a tight labour market. The result is a hidden price increase that falls hardest on the young and the low-paid, who are more likely to eat out or use personal services.
Behind the macroeconomic warning lies a more visceral story of changing social norms. In the US, tipping is a fraught subject: a way of transferring the burden of low wages from employer to customer, laced with racial and class tensions. Here, it has traditionally been a voluntary reward for good service. But as American chain restaurants expand and contactless payment systems make the ‘ask’ easier, the line between optional and expected is blurring. Workers face a new anxiety: the fear that a declining tip will be seen as a judgment on their performance.
Some unions have welcomed the shift. Unite the union argues that mandatory service charges, if properly distributed, can provide a stable supplement to low wages in a sector notorious for precarious work. But others warn that it lets employers off the hook. “The real issue is that many hospitality workers are on poverty wages,” said one organiser. “Instead of relying on the goodwill of customers, we need a living wage from the employer.”
The Treasury’s intervention suggests the government is watching closely. Officials are reportedly mulling whether to extend the ban on employers keeping tips – introduced in 2023 for cash gratuities – to cover digital service charges. The fear is that without regulation, the UK will drift into an American-style system where customers become de facto paymasters, and tipping becomes a mandatory tax on a meal out.
For now, the British public remains divided. Polling shows that younger Londoners are more willing to accept a standard tip, while older and northern consumers resent the presumption. In Yorkshire, where I grew up, a tip is still something you earn, not something you expect. If the Treasury’s fears are realised, the choice may soon be taken out of our hands entirely.
