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Bank of England Delivers Fifth Rate Cut as Hospitality Sector Seeks Relief

The Bank of England has reduced the base rate to 4% following a closely contested vote that required an unprecedented second ballot, offering potential respite to Britain’s beleaguered hospitality and licensed trade sectors.

The Monetary Policy Committee’s 5-4 majority decision to cut rates by 0.25 percentage points marks the fifth reduction in twelve months, bringing borrowing costs to their lowest point since March 2023. For pub chains, restaurant groups, and hotel operators carrying significant debt loads, this represents the most favourable lending environment in nearly two years.

Kate Nicholls, Chair of UKHospitality, said: “While we welcome the news that interest rates are coming down, the hard truth is that it’s not enough to unlock the growth our sector desperately needs. Banks must prioritise growth by ensuring businesses can access affordable finance, especially in hospitality, which continues to face mounting cost pressures.”

“To truly revive the high street and boost job creation, the Government must go further: lower business rates through the promised 20p discount for hospitality, fix NICs by extending exemptions to young people and those moving from welfare to work, and cut VAT to match our European competitors and drive investment.”

“Without these measures, businesses risk being taxed out of existence. Many have already been forced to cut back – on jobs, on investment and on ambition, despite the sector being primed as a key driver to help power the UK’s economic recovery.”

Governor Andrew Bailey acknowledged the tight margins of the decision, stating the committee faced a “finely balanced” choice. The historic requirement for a second vote – the first such occurrence in MPC history – underscores the complexity of current economic conditions affecting business confidence across the hospitality sector.

Chancellor Rachel Reeves said: “This fifth interest rate cut since the election is welcome news, helping bring down the cost of mortgages and loans for families and businesses.

“The stability we have brought to the public finances through our Plan for Change has helped make this possible and helped us become the fastest growing economy in the G7 in the first quarter of this year. We’re locking in this growth in the long run by investing over £113bn in infrastructure, securing three major trade deals and embracing the technologies of the future – to drive up wages and improve living standards across the UK.”

Recent ONS statistics paint a concerning picture for labour-intensive hospitality businesses. Unemployment has climbed to 4.7% over the three-month period ending in May, representing a four-year peak that particularly impacts service sector recruitment.

Simultaneously, wage growth excluding bonuses has decelerated to 5% – the weakest expansion in almost three years. This combination of rising joblessness and moderating pay increases creates mixed pressures for hospitality operators already grappling with elevated staffing costs and recruitment difficulties.