Hospitality companies undergo enterprise charges and wage hikes double-whammy

Hospitality companies will receive less business rates relief from the next financial year, Chancellor Rachel Reeves’ Budget confirmed.

Pubs, restaurants and bars will be allowed a 40 per cent discount on their business rates bills from April up to a maximum cap of £110,000 per firm.

They currently enjoy a 75 per cent rebate introduced by then-Chancellor Rishi Sunak in 2021 to try and kickstart Britain’s hospitality sector, which was ailing from closures and Covid-related trading restrictions.

While pandemic-related curbs have ended, the industry has experienced a surge in venues shutting for good owing to soaring energy prices, consumer spending pressures, and industrial action by railway workers.

Like other industries, hospitality bosses have long complained about the business rates regime, arguing it is squeezing profitability and is weighted against bricks-and-mortar operators.

Reeves told the House of Commons that business rates were ‘a major source of concern’ for high street firms.

She blamed the previous government for ‘creating a cliff edge’ by not promising to extend temporary business rates relief beyond March next year.

Alongside the new 40 per cent rates relief, Reeves announced plans to continually lower business rates multipliers from 2026-27 for high street retail, hospitality and leisure companies.

She also said pubgoers would get ‘a penny off the pint’ with a 1.7 per cent reduction to duty on draught products, impacting around two-thirds of drinks sold in pubs.

However, hospitality groups say costs will rise and the government is not providing the industry with enough support. 

Simon Dodd, chief executive of Young’s, said the reduction in draught duty is ‘a small step towards reducing the huge tax burden faced by our industry. 

‘Unfortunately, given the other measures announced today, there are many more snakes than ladders for the hospitality sector, a vital industry for the communities we serve and the country’s economy as a whole.’

Employers’ national insurance will go up by 1.2 percentage points to 15 per cent, while the secondary threshold is going down from £9,100 to £5,000, measures Reeves said would raise £25billion per year.

At the same time, the National Living Wage is increasing by 6.7 per cent to £12.21 per hour, and the minimum wage for 18 to 20-year-olds is jumping by 16.3 per cent to £10 per hour.

Conor Sheridan, chief executive and founder of restaurant software provider Nory, believes the NLW hike will ‘massively impact labour costs, which already account for a significant portion of business expenses for many venues.’

He added: ‘As we move forward, it’s essential for the government to prioritise measures that help to alleviate these pressures.

‘Without targeted support, we risk stifling the growth and recovery of a vital sector that has the potential to drive economic growth and create further jobs across our communities.’

Hospitality employs 3.5 million people in the UK and contributes £93billion annually to the country’s economy, according to trade body UKHospitality.

Kate Nicholls, its chief executive, said: ‘This budget is the latest blow for hospitality businesses. Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.’

However, she praised Reeves for taking UKHospitality’s advice to have a permanently reduced level of business rates for hospitality.

‘Levelling the playing field in this way recognises the importance of the high street and the role it plays in our communities and economy,’ Nicholls added.