Uber is popular because it is cheap. It undercuts regular tax fares. One way it does that is by subsidising fares and absorbing large losses, and the other way is by not paying VAT.
Uber avoids VAT because all its drivers are each registered as separate businesses and their individual incomes are too small for them to need to be registered for VAT.
Uber has 40,000 UK drivers and estimates the cost to of paying VAT would be £1000 per driver per year.
The UK market is important to Uber because it accounts for a third of all Uber’s European revenues.