Chancellor John Healey’s maiden Budget has left hospitality businesses facing further increases in wage bills and alcohol duty, with calls for lower VAT and relief on employer National Insurance contributions going unanswered.
Support is concentrated on smaller businesses, with the Small Business Rates Relief threshold for retail, hospitality and leisure properties in England set to rise from £12,000 to £18,000 in rateable value.
But operators say the measure will do little for businesses above that threshold, which continue to face rising employment, energy and food costs.
The national living wage will rise by a further 3.9% in April, while a real-terms freeze on business rates still allows bills to increase with inflation.
For many in the sector, the package falls well short of the intervention needed to protect jobs, sustain investment and prevent further closures.
Chef and restaurateur Tommy Banks describes himself as “very disappointed”, saying the rates relief will have little impact on established hospitality businesses.
“The government are obviously celebrating their rate relief for small businesses that they’ve provided, which has been frozen since 2017, so it doesn’t actually quite go in line with inflation,” he says, adding that the measure would affect few businesses and “certainly none of mine”.
Banks says the sector is facing its hardest trading conditions in his 20 years in hospitality, pointing to rising wages, employer National Insurance, food inflation and commercial electricity costs.
“Businesses cannot absorb these costs. Customers cannot absorb price increases, they’ve got less money too,” he says, warning that the combined pressures are contributing to business closures and job losses.
Dom Jacobs, founder and managing director of Ardent Pub Group, says the higher business rates relief threshold will do little for pubs with larger teams and investment plans.
He argues that the government’s approach to employment costs is at odds with its ambitions to tackle youth unemployment.
“Raising the cost of employment while asking businesses to tackle youth unemployment pulls policy in opposite directions, and the government needs to make taking on the next person easier,” he says.
Jacobs calls for a VAT cut, a freeze on beer duty, interest-free loans to help venues install energy-saving infrastructure, and properly funded planning and licensing reform.
“The ambition should be a sector that thrives, not one that’s just surviving,” he adds.
Markus Thesleff, founder and CEO of Thesleff Group, says operators have seen costs almost double in five years.
“The higher rates threshold does nothing for businesses of any real size, and nothing in this Budget eases the pressure on operators,” he says.
He warns that businesses across hotels, cafés, restaurants and retail are either passing rising costs on to guests or being forced to question whether they can continue trading.
“Businesses can’t afford to hire and can’t risk it, and it is young people and graduates who are paying the price,” he adds.
Sam Harrison, founder of West London restaurants Sam’s Riverside and Sam’s Waterside, says the Budget offers little hope for hospitality, with wages rising, VAT unchanged and operators “feeling flat”.
“I’m not an economist. Just a restaurateur who’s still on the floor most days, 21 years after opening my first place,” he says. “Nobody’s coming to save us. Especially not this government. I’ll keep doing what I’ve always done: roll up my sleeves, lead from the front, back my brilliant team, and make every guest feel like the only one in the room. Good hospitality still wins.”
Business rates relief offers limited help
While some operators welcome the higher relief threshold, others question how many restaurants will benefit.
Matt Bigland, CEO of Blend Family, says the measure will take “tens of thousands of shops, cafés and restaurants out of business rates”.
“But the government is giving with one hand and taking with the other,” he says, warning that changes to Business Asset Disposal Relief send the wrong message to entrepreneurs.
“Entrepreneurs who spend years building a successful business shouldn’t feel penalised when the time comes to sell,” he adds, arguing that frequent changes to taxes and reliefs make it harder for owners to plan with confidence.
Joe Mercer Nairne, co-owner of London restaurants Medlar and Cornus and chef-patron of Medlar, says the new threshold will offer little help to London restaurants.
“A rateable value of £18,000 is extremely low for London,” he says, explaining that it would cover units of around 350 sq ft or smaller.
Medlar, which he describes as hardly a large restaurant, has a rateable value of £74,500.
“This really is no help to London hospitality at all. There is nothing in this Budget that helps us,” he says.
Alex Hunter, founder of The Sea, The Sea, welcomes the relief but questions its impact.
“Every little helps, and we’ll take what’s on offer. I wasn’t expecting the Chancellor to raise the business rates relief threshold, so it’s a positive step, but it won’t make a material difference,” he says.
Spencer Large, founder of Sune and The Poet, is more dismissive.
“Any relief for small businesses is, of course, welcome, but to be honest, it feels a bit like putting a plaster on a missing limb,” he says. “This change will help some, but for most it quite literally won’t touch the sides.”
Calls for a VAT cut grow louder
The lack of movement on VAT is a central frustration, with the sector continuing to press for a reduction from 20% to 10%.
Banks argues that cutting VAT is the most significant step the government could take to ease pressure on hospitality.
“The only thing you could do is to reduce VAT on hospitality, like they do in every other European country, because that’s how the model works,” he says.
He warns of further closures and job losses without intervention, saying the campaign for a reduction will intensify: “We’re going to have to make so much noise that it’s deafening.”
Simon Mitchell, CEO of street food collective KERB, welcomes the business rates changes as a first step for independent food businesses, but says VAT remains the government’s biggest opportunity to provide immediate relief.
Mitchell points to KERB’s operations in Berlin, where he says a VAT cut has demonstrated the impact of government intervention on food traders.
Without similar action in the UK, he warns, independent operators risk losing ground to larger businesses better placed to absorb costs through supply chain efficiencies.
Large also describes VAT as the “obvious issue” facing British hospitality, arguing that the 20% rate on restaurant dining puts pressure on businesses already operating on tight margins.
“If the staff in an industry generally feel underpaid, the customers generally feel overcharged, and the owners aren’t making any money, surely that’s the definition of a broken model?” he says.
Employment costs threaten entry-level jobs
Operators also warn that higher wages and employer National Insurance contributions are making it harder to recruit, undermining the government’s efforts to tackle youth unemployment.
Everett Fieldgate, CEO of Creams Café, says the Budget has missed an opportunity to reduce the cost of hiring.
“The rates relief is welcome. Lifting the small business threshold from £12,000 to £18,000 will help small operators. But it does nothing about the two things that really decide whether a young person gets hired: the cost of employing them and the tax on what we sell,” he says.
The minimum wage for 18 to 20-year-olds will rise from £10.85 to £11.27 in April.
Fieldgate also points to the increase in employer National Insurance to 15% and the reduction in the earnings threshold at which contributions begin.
He says the consequences are already visible in youth unemployment and falling vacancies, warning that hospitality is particularly exposed because 42% of its workforce is aged 16 to 24.
“When entry-level workers become more expensive to hire, there are fewer entry-level jobs,” he says.
Fieldgate argues that a £3,000 grant will not resolve the underlying problem.
“The truth is simpler than any scheme: when first jobs are affordable to create, young people will get them.”
Night-time economy calls for immediate action
Michael Kill, CEO of the Night Time Industries Association (NTIA), says the Budget acknowledges some of the pressures facing pubs, clubs and music venues through measures covering business rates, energy costs, youth employment and apprenticeships.
However, with around 70% of the sector made up of small and medium-sized businesses, he says the extent of meaningful financial relief remains unclear.
“The detail underpinning these announcements will be critical in determining who benefits,” he says.
Kill warns that the measures are unlikely to reverse years of rising costs, depleted reserves and weaker consumer spending.
“We must recognise progress where it has been made, but we cannot confuse limiting further damage with repairing the damage already done,” he says.
He calls for immediate action alongside longer-term reform, warning: “For many, the priority is no longer growth, but survival.”
Kill says a short-term strategy developed with the industry is needed to prevent further business losses and create the conditions for recovery.
“One Budget cannot undo years of damage,” he says.
Alcohol duty adds to the pressure
The drinks industry has also criticised the Budget, warning that further alcohol duty increases will add to the pressure on businesses and consumers.
“No-one will be toasting yet another RPI increase on top of rising inflation,” says Miles Beale, chief executive of the Wine and Spirit Trade Association.
Beale argues that higher duty risks stifling British businesses and deterring spending on drinks, calling on the government to reconsider its approach.
“Increasing alcohol duty is not boosting Treasury funds, but it is closing down businesses and pricing consumers out of a bit of joy in their shopping basket,” he says.