It’s been over a month since Chancellor Rachel Reeves unveiled the 2024 Autumn Budget, and it’s safe to say it hasn’t been greeted with applause by the hospitality sector.
Kate Nicholls, CEO of UKHospitality, summed up the mood across the industry:
“This Budget is the latest blow for hospitality businesses. Rising taxes, increasing costs, and fragile consumer confidence risk bringing growth to a grinding halt.”
The changes have sparked a lot of concern, with businesses warning that tough times are ahead. Rising payroll costs, slashed business rates relief, and other cost hikes are making 2025 look like an uphill battle for an industry that’s already been through the wringer.
We’ve rounded up what industry leaders, experts, and operators are saying about the Budget – and what it means for hospitality businesses across the UK.
Labour Costs Are Going Up in 2025
The biggest blow to hospitality comes from the rising cost of labour. From April 2025, the National Living Wage (NLW) will jump 6.7% to £12.21/hour for workers aged 21 and over.
For younger workers aged 18-20, wages will see an even bigger bump – 14.8% – up to £10/hour. On top of that, employer National Insurance Contributions (NICs) are going up from 13.8% to 15%, and the tax-free threshold is being slashed from £9,100 to £5,000.
For an industry where wages are already a huge chunk of expenses, these changes are a serious blow.
Kate Nicholls, CEO of UKHospitality, didn’t sugar coat it:
“The tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it. Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.”
Anthony Davies, partner and head of tax at UHY Hacker Young, echoed the concern:
“The rise in employers’ National Insurance rates is a huge blow to businesses. A lot of low-margin sectors like hospitality are going to struggle to cover those new costs. We expect to see those sectors step up their transition away from workers and towards technology.”
And the owner of Sam’s Riverside and Sam’s Larder, Sam Harrison, shared a sobering outlook:
“This Budget has the potential to be very damaging for the sector. Sadly, I think we will see more closures rather than growth in 2025.”
The government’s bump to the Employment Allowance – from £5,000 to £10,500 – offers some help for smaller businesses, but for most operators, it’s a drop in the bucket compared to the rising costs coming their way.
Business Rates Relief: A Steep Climb Ahead
For years, business rates relief has been a lifeline for hospitality businesses. The current 75% relief, introduced post-pandemic, has been critical in helping venues stay afloat. But starting April 2025, that relief will drop to 40%, capped at £110,000 per business – a steep climb for many.
The numbers are daunting. According to Altus Group, restaurants will see their average rates bill rise from £5,051 to £12,122, while pubs will face an increase from £3,938 to £9,451.
Simon Green, head of business rates at Gerald Eve, called the decision “absolute madness”:
“It will see rates bills more than double overnight for 250,000 small businesses, leading to business failures and job losses.”
Kate Nicholls agreed that this reduction leaves businesses struggling:
“Avoiding the business rates cliff-edge next April was critical, and it was important that some relief has been extended. However, the reduced level of 40% is another cost that businesses have to deal with.”
But it’s not all bad news. Nicholls also highlighted the government’s commitment to introducing permanently lower business rates for retail, hospitality, and leisure properties by 2026/27:
“I am pleased that the Chancellor is implementing UKHospitality’s recommendation for a permanently lower 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.”
While the long-term plan offers some hope, many feel the immediate relief falls short. Green called it a letdown after years of promises:
“Businesses will be hugely disappointed. After three years of Labour promising abolition and replacement of the business rates system... this falls woefully short of what they were hoping for.”
For now, the hospitality sector is left navigating a challenging in-between – coping with rising costs now while waiting for a more sustainable system to (hopefully) arrive in 2026.
Draught Duty Cut: A Small Win Amid the Challenges
One of the few bright spots in the Budget was a 1.7% cut in draught beer duty, which translates to about a penny off a pint.
Ash Corbett-Collins, chairman of CAMRA (Campaign for Real Ale), welcomed the move:
“This will help pub-goers as well as independent breweries and cider producers who sell more of their products into pubs. It recognises the principle that drinking in the community setting of the local pub is far preferable to the likes of cheap supermarket alcohol.”
However, Emma McClarkin, CEO of the British Beer and Pub Association, noted that the overall impact of the Budget far outweighs this small relief:
“The cumulative impact of today’s announcement means a £500m increase to the cost of doing business for the industry, putting pubs, brewers, investment, and jobs at continued risk.”
What’s Next for Hospitality?
The industry’s leaders are calling for more targeted support. Michael Kill, CEO of the Night-Time Industries Association, highlighted the precarious state of the nighttime economy:
“The extended business rates relief is a minor concession amongst the array of tax increases and fiscal shifts. (...) While rightly intended to support the workforce, (these measures) will have severe repercussions for already struggling businesses across the sector.”
Nick Summers, MD of the Nationwide Caterers Association, pointed out the missed opportunities:
“Independent hospitality has suffered enough. Without profit, we are merely tax collectors. Solutions such as hot food tax reform or a meaningful VAT threshold increase have been ignored again.”
For many, the focus now shifts to adapting to these changes and finding ways to mitigate their impact. As Kate Nicholls put it:
“The government must work with the sector in the design and delivery of these significant changes to get it right.”
Now’s The Time to Keep Numbers in Check
The Autumn Budget has raised the stakes for hospitality businesses. With rising costs and tighter margins, guessing your way through finances just won’t cut it any more. The businesses that thrive in 2025 will be the ones that stay on top of their numbers and make decisions in real-time.
At Outmin, we simplify everyday accounting. Our AI bookkeeping ensures accurate, stress-free finances with daily cash flow updates and clear reports on your financial status. From payroll to VAT and even the trickier tasks like funding applications, we’re here to take the accounting load off your plate – so you can focus on running your business.
The reality is, navigating tighter margins means staying sharp. Knowing your numbers isn’t just a nice-to-have any more; it’s what will help businesses stay ahead and adapt. With Outmin, you’ve got one less thing on your plate – and a partner to help keep things moving forward.
Final Thoughts
The 2024 Autumn Budget has made one thing clear: the road ahead for hospitality will be tough. Rising costs and tighter margins leave little room for error, and many businesses will be forced to make difficult decisions just to stay afloat.
As Emma McClarkin of the BBPA put it:
“Only when the government delivers full support will businesses have the headroom for future investment and growth.”
While meaningful support feels out of reach for now, the focus must shift to resilience. By adapting operations, tightening controls, and staying proactive, hospitality businesses can weather the storm – and maybe even find opportunities amidst the challenges.
Book a demo with Outmin to see how we can help lighten the load.
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