Average Pub Faces 78% Business Rates Rise as Wage Inflation and VAT Stagnation Push Sector to Breaking Point

The UK pub and restaurant sector is warning of a severe financial tightening following last week’s Budget, which confirmed another rise in the standard business-rates multiplier, a steep uplift in the National Living Wage and no VAT support for hospitality.

Combined with softening consumer behaviour and a shrinking trading estate, industry groups say the sector is being pushed to its limits.

The Oxford Partnership has analysed more than 15,000 hospitality venues and found that 87.6% will see an increase in Rateable Value from April 2026. By comparing the 2023 Rateable Values (using the current multiplier and 40% hospitality relief) with the new 2026 Rateable Values (using the updated discounted multiplier), Oxford has identified a significant escalation in cost pressures for the sector. For pubs, the average annual Business Rates payable will rise from £8,899 to £15,630 — a 78% increase. Larger venues with Rateable Values above £500,000, typically major pubs, bars and hotels, face even sharper jumps, with many seeing increases of more than 200%.

According to The Oxford Partnership’s latest Market Watch data, the UK now has fewer than 100,000 trading venues, marking a continued contraction in the hospitality estate. With many operators already reporting flat or declining footfall, the latest rates rise increases the risk for businesses already stretched to the edge.

Labour costs present a further challenge. Staffing accounts for 40 to 45 percent of operating expenditure in most pubs and restaurants, and the accelerated rise in the National Living Wage is expected to drive a 7 to 10 percent uplift in payroll costs. This comes at a time when midweek footfall, historically the most fragile trading period, continues to fall year on year, amplifying the strain on venues that rely on consistent daily revenue.

VAT remains the missing lever for recovery. With no reduction announced, the UK maintains one of the least competitive hospitality VAT regimes in Europe. Despite nominal consumer spend increasing, The Oxford Partnership’s data shows real-term spend is falling and drink volumes per visit continue to decline.

Operators are attempting to generate profit from lower throughput, a model the current market cannot support.

Adding to the pressure, the Autumn Budget introduced an inflation-linked alcohol duty rise, which industry bodies have described as a hammer blow to an already fragile night-time economy.

By increasing duty in line with RPI, and triggering additional VAT on top, the government has layered yet another cost onto an industry grappling with shrinking margins, rising utilities and weakened demand.

Alison Jordan, CEO of The Oxford Partnership, said: “Pubs and restaurants are exposed on every front. Business rates are set to jump sharply — with the average pub facing a 78% increase — at the same time as wage costs climb, VAT reform remains off the table and duty is rising again. These pressures do more than erode margins; they undermine the long-term viability of venues that play a vital role in our communities. Structural reform is now essential.”

The Oxford Partnership’s latest Market Watch shows operators cutting hours, delaying refurbishments and reducing menu complexity, with core city centres seeing particularly soft footfall and declining drink volumes per visit.
Industry leaders continue to urge government to pursue a permanent reduced VAT rate, a rebalanced business-rates system and investment incentives capable of stabilising the sector.