Many hospitality businesses have been calling for meaningful support from the government to provide for a sector facing a litany of economic pressures. John Healey may be a beer man himself and was quick to refer to the Prime Minister’s fondness for pubs, but the Autumn Budget has not provided the comprehensive reform that pubs and restaurants were looking for.
Despite a consistently hostile financial environment, operators have adapted to control the measures they can control, leading to footfall being maintained even from a changeable consumer base. The issue is that venues still face a significant cost base they don’t have control over, and both big chains and independents are feeling the strain.
Labour costs remain a major concern
Today’s announcements may further weigh this cost base down. We’ve seen another increase in national minimum wage. While this may contribute to more cash in consumers’ pockets, operators had to establish hiring freezes in response to the last rises in minimum wage, and a similar response may be seen this time around. The staggered rises for 18-20 year olds may mean pubs and restaurants hire more young people, but at a time when talent retention has been critical, more wage compression will likely result in greater costs to keep senior staff.
Business rates: welcome support, but no long-term solution
The raising of the threshold for business rates relief from £12,000 to £18,000 is a welcome measure for this portion of the sector, while the continuation of business rates support provides some much-needed short-term certainty for operators. However, there remain inconsistencies with the business rates model itself. While a freeze of rates for the next two years is encouraging and the pending Jerry Schurder review of business rates is cause for optimism, it’s perhaps a case of kicking the can down the road. Pubs and restaurants will continue to face the challenges presented by a business rates system that many argue doesn’t reflect modern trading realities, with little ability to plan beyond 2028.
Some positives for drinks producers
There are also positive signs for the sector’s supply chain. The additional £10 million a year being provided through Small Producer Relief will be welcomed by the more than 2,000 alcohol producers across the UK expected to benefit. Supporting qualifying brewers, cider makers and other drinks producers should help preserve diversity across the drinks market and provide some relief from rising labour, energy and input costs. However, while welcome, the measure is targeted and is unlikely to materially offset the broader cost pressures facing hospitality operators.
Travel and tourism still awaiting reform
Beyond pubs and restaurants, the wider visitor economy will be disappointed by the lack of progress on the Tour Operators Margin Scheme (TOMS). The confirmed power for local authorities in England to introduce an overnight visitor levy adds a further challenge for accommodation providers and the wider UK travel industry. Hospitality, travel and tourism businesses have long argued that tax reform could improve the UK’s competitiveness as a destination and encourage greater investment across the sector. With little clarity on TOMS reform, many operators will continue to wait for meaningful action that supports growth across the broader tourism ecosystem.
Hospitality needs more than good intentions
The Prime Minister and Chancellor may make a catalogue of social media videos in pubs, but the hospitality sector needs to see actual, tangible reform. Calls to cut VAT for hospitality to 10% have fallen on deaf ears, and while government messaging may say it’s on the side of pubs, restaurants and hospitality businesses, we need to see that reflected in policy direction.
For many operators, this Budget contains some welcome measures around business rates support and drinks producers, but stops short of addressing the structural challenges the sector has repeatedly highlighted. The industry will continue doing what it has always done: adapting, innovating and finding ways to grow. The question is whether policymakers are prepared to do the same.
