What Could The Chancellor Do To Support The Hospitality Sector?
By Anastasia Whitlock, Senior Associate in the corporate team at Birketts LLP (www.birketts.co.uk)
With the Autumn Statement approaching on 26 November, the UK’s hospitality and leisure sector stands at a critical juncture – facing mounting fiscal pressures that threaten its recovery and long-term viability.
The cumulative impact of recent policy decisions, most notably those introduced in the 2024 Autumn Budget, have been profound. The escalation in employer National Insurance contributions, alongside significant increases to both National Minimum Wage and National Living Wage thresholds, has disproportionately affected hospitality operators who are still recovering from the pandemic’s long tail. Simultaneously, the reduction in business rates relief coupled with inflationary pressures on energy, food, and supply chains, has created a perfect storm.
Recent analysis paints a stark picture:
• £1.9 billion increase in annual payroll costs
• £3.4 billion rise in operating expenses
• 1 in 3 businesses have reduced operating hours
• 1 in 8 have closed sites entirely
• 63% have cut staff hours
• more than 50% of job losses since the last Budget stem from this sector.
To restore equilibrium and unlock growth the Chancellor may consider a suite of targeted measures:
Employment and skills
• expand NIC exemptions for young and returning workers to reduce costs and boost employment recognising the sectors potential to contribute to the Government’s 80% employment target
• tie statutory wage increases to inflation to ensure economic sustainability
• prioritise hospitality in adult skills funding and in foundation apprenticeship programmes.
Business rates
• honour the commitment to permanently reduce business rates multipliers, with the maximum discount applied to properties under £500,000 rateable value
• introduce scalable reliefs for larger venues to offset the high-value surcharge.
VAT
• reduce VAT on hospitality services to 10–13%, in line with EU averages, rather than the UK’s current 20%
• implement seasonal VAT reductions to stimulate off-peak demand and regional tourism.
Trade, innovation and sustainability
• extend reduced import tariffs on key food and beverage items to alleviate cost pressures and support margin recovery
• offer digital innovation grants and tax credits for technology upgrades, including support for the Hospitality Skills Passport which aims to streamline training records and reduce duplication
• fund local visitor economy partnerships and incentivise green investment to support the UK’s net zero ambitions.
Hospitality is reported to contribute £54 billion in tax revenues and employs 3.5 million people annually. The Chancellor must recognise that short-term relief for hospitality is not a concession, it is a strategic investment. Additionally, hospitality businesses provide a social infrastructure that fosters community, culture, and cohesion. A thriving hospitality sector will yield long-term dividends in employment, tax receipts, tourism, and societal wellbeing.
In my view, the Autumn Budget presents an opportunity to recalibrate the Government’s approach. By easing the cost of doing business and enabling innovation, the Chancellor can lay the groundwork for a resilient, future-facing hospitality industry which continues to serve as a vital piece of the UK economy.
Think of it as, hospitality’s short-term gain is the UK’s economic and societal long-term gain. In the words of a hospitality director: “Don’t let policy become the thing that ends what centuries never could. Don’t be the ones who call time on the great British Pub”.