Pubs say “cavalry” failed to arrive as Healey’s Budget leaves VAT untouched
Pub and hospitality leaders have given Chancellor John Healey’s Autumn Budget a cautious and often critical reception.
They welcomed targeted business rates relief and a new guest beer right for tied tenants, but said these were outweighed by higher labour and alcohol duty costs and by the absence of a VAT cut.
What was announced
Delivering the Budget on Wednesday, Healey raised the threshold for small business rates relief for retail, hospitality and leisure businesses from £12,000 to £18,000. The Government says this will bring around 70,000 more businesses into the scheme. A two-year real-terms freeze in business rates for other businesses in the sector was also confirmed.
Operators also referred to a further 20% reduction in business rates. The Government will fund its rates package partly by raising machine games duty from 20% to 25% on higher-stakes gambling machines.
The National Minimum Wage and National Living Wage will both rise by 3.9% from April 2027. This takes the National Living Wage to £13.20 an hour.
Alcohol duty will rise, with the increase due from February 2027. The Budget also includes a £10m alcohol duty relief scheme for smaller brewers and cider makers. In addition, tied pub tenants in England and Wales will be allowed to serve a guest beer of their choice.
The Chancellor made no mention of hospitality VAT. The sector has spent months campaigning for the rate to be cut from 20% to 10%. There was also no relief on employer National Insurance
contributions.
“The cavalry didn’t arrive”
Steve Alton, chief executive of the BII, said members would be “hugely disappointed”. He said the Government had recognised the vital contribution pubs make in every community, but the Budget “does little to reduce the cumulative tax burden holding them back”.
Alton said that even the smaller increase in the National Living Wage means an average of £1,000 more for every full-time member of staff from April 2027. He added that only one in four pubs made a profit in 2026 and that more than 40p in every £1 spent in pubs goes to the Government in tax. Many members, he said, are “already at breaking point”, with some working upwards of 80 hours a week.
Alton called VAT in line with other European countries “the simplest and most impactful step”. He reminded the Government that the Prime Minister had said pubs “need to know that the cavalry is coming”. “Today, it simply didn’t arrive,” he said.
That phrase was echoed across the sector. Chris Jowsey, chief executive of Admiral Taverns, said there was “still no sign of the Cavalry promised by Andy Burnham”. He called the higher small business rates relief threshold and extra 20% rates reduction “a welcome step”. He also said the beer duty rise was “concerning”, as was “the introduction of yet more regulation for pub companies”.
Greene King chief executive Nick Mackenzie said the Chancellor had offered “vital extra breathing space for the smallest pubs and brewers”. But he argued that rising employment costs combined with the beer duty rise “will more than outweigh any benefit from the 20% business rates relief”. He said only long-term business rates reform, or a VAT cut, “will ease the relentless cocktail of costs we continue to face”.
Operators: “Surviving, not thriving”
Licensees speaking through the BII were blunt. Miranda Richardson of The Squirrells in Duston said small businesses cannot keep absorbing pressures indefinitely. She said pubs need “a Government that makes it financially viable for us to thrive, not simply survive”.
Mark Wrigley of Atlas Bar in Manchester said the Budget leaves the sector “in a state of stasis”. He added that his business will “continue to hold the line and look to contract to save cash, rather than be bold and seek to grow”.
Eamonn England and Arina Piskunova of The Windsor Castle in East Finchley welcomed the pledges on business rates and the option for some tied tenants to go free of tie on one beer. They said “the VAT issue remains very much the same” and employment costs continue to rise.
Justine Bedford of The Royal Dyche in Burnley said she had been “genuinely excited” when Burnham took over from Keir Starmer. She asked: “How many more pubs need to close before they listen?”
Restaurants and hotels
Robert Pyle, EY UK&I restaurant sector lead, said the National Living Wage rise will be particularly significant for restaurants, where labour is one of the largest operating costs. He said the extra rates support is “particularly relevant” for hospitality, though its impact will vary with the size and rateable value of each property. He added that the alcohol duty rise is another cost operators must manage. The key question, he said, is whether the package gives businesses enough confidence to invest.
Steve Perez, founder of Global Brands, Casa Hotel and Peak Edge Hotel, welcomed business rates reform. He said hotels and restaurants had been unfairly excluded from earlier relief measures, and that his own rates had risen by 120%. He said it was “disappointing” that VAT was not cut. He noted that Burnham had publicly backed a lower hospitality rate before becoming Prime Minister, and that the UK has the second-highest hospitality VAT rate in Europe.
Giles Fuchs, owner of Burgh Island Hotel, said further rises in employment costs risk “compounding those losses rather than creating the conditions for more jobs”. He welcomed the 20% rates cut but questioned how sustainable the relief will be.
Beer and brewing
CAMRA chairman Ash Corbett-Collins described the guest beer right as “incredibly welcome”. He said it could help independent brewers get more beers onto bars if introduced properly. He also welcomed the £10m duty relief scheme. He said the beer duty rise would be passed on to pints in pubs, and that the Chancellor “could and should have cut tax specifically on beer and cider served in pubs”. CAMRA also called on the Government to publish its Access to Market Review.
Scotland and tourism
Paul Togneri of the Scottish Beer & Pub Association said the Budget “offers very little for Scotland’s pubs”. He called on the Scottish Government to pass on the full value of any Barnett consequentials from business rates support in England.
Joss Croft OBE, chief executive of UKinbound, welcomed the higher relief threshold and the two-year rates freeze. He described the proposed timetable for an England Overnight Visitor Levy as “a significant red flag”. He said the industry needs a minimum 18-month implementation period, and criticised the inflationary rise in Air Passenger Duty as a missed chance to improve UK competitiveness.