Business rates are set to rise in April 2026 for the UK high street. Under this Government, significantly increased rates are planned for restaurants, hair salons and other high street shops – but now, seemingly not pubs.
Pubs matter, but so does the rest of the high street. According to The Local Data Company, the top three occupiers over the last 15 years remain hairdressing and beauty, cafes and fast food, and restaurants. These businesses have been the constants on our high streets, often the centre of physical communities in an economy grappling with a loneliness epidemic and the looming impact of AI on jobs. These are the spaces where people meet, celebrate, commiserate, gossip and fall in love. They also happen to be the most labour-intensive.
The UK high street’s most labour-intensive businesses were disproportionately squeezed in the previous Budget, with significant rises in employer NICs and wages, while other costs such as energy and materials have also increased.
There seems to be growing awareness of the impact on ‘people-based’ businesses that employ large workforces; services that cannot move online are limited in the cost savings they can make – placing already thin-margined businesses in the toughest trading environment to date.
So why don’t we, as a nation, care about these businesses when they matter so much to local communities?
Reeves told reporters at Davos: “The situation the pubs face is different from other parts of the hospitality sector but we will be setting out the detail in the next few days.” She is expected to announce tax relief – “but this package is for pubs”, she says.
I work in both hairdressing and restaurants. The lovely thing about each is that they have to be in person. While the Government’s Industrial Strategy largely overlooks these sectors, favouring fast-growth, tech-heavy industries, I remain confident about our enduring and important impact on local communities.
Last week at my restaurant we arranged a taxi for a local customer who was unwell and became confused. Every week in the salon one of our stylists washes a longstanding client’s hair for free because she has found it difficult to do herself since a stroke.
Neither instance is unique; they are examples of the care these personal businesses afford their communities, week in, week out. Why, then, does the Government’s U-turn on business rates apply to pubs alone?
Allen Simpson, chief executive of UKHospitality, said: “The entire hospitality sector faces the same cost challenges, from eye-watering business rates hikes to the soaring cost of employment. These are not challenges unique to pubs. Our hotels, restaurants and cafes, to name a few, all face their business rates bills increasing by thousands, driven by the same large increases to rateable values affecting pubs. These businesses employ six in seven people in hospitality. The Government has one chance to get this right. Without a package of support for the entire sector, I fear it will be too little, too late.”
What many on the high street find so unfair about the tax rises imposed by successive governments is that these businesses must dramatically increase turnover simply to cover new costs. Under current plans, my restaurant’s rates bill will be 60% higher by 2028/29. This comes on top of a hugely damaging increase in NICs and the well-documented rise in the cost of produce, energy and other essentials. As always, there is only so much of these costs you can pass on to the customer. It leads to a situation in which working hard and being busy may still mean barely breaking even.
The UK sits apart from many European nations in how it treats these businesses, VAT being the clearest example. Voices across these sectors have long called for a cut to the VAT rate, bringing it in line with the reduced rates applied to labour-intensive businesses internationally. In Ireland (with VAT at 23%), a reduced rate of 13.5% applies to restaurants and 9% to hotels and hairdressing. Italy (with VAT at 22%) is well known for its food culture and the democratic nature of its restaurants – incubated by government policy, with a reduced hospitality rate of 10%.
The business rates debacle is the latest in a string of confused policies, with businesses still uncertain about what they will owe in just three months’ time. Hopes are raised by the suspected U-turn on pubs – because why would it be just pubs? It is independents who have suffered most under successive governments. They lack the finances, lobbying power and accountancy wheezes to withstand these constant challenges. If the Government is serious about protecting the high street – and employment on it – it needs a more nuanced, sophisticated tax system. Rachel Reeves might think she is saving face by helping pubs alone, but those on the ground know this makes little sense.