Hospitality companies are dealing with double business rates and wage increases
- Catering companies receive a 40% discount on their business rates
- Reeves said business rates were “a major concern” for large companies
Hospitality companies will receive less discount on business rates from next financial year, Chancellor Rachel Reeves’ Budget confirmed.
Pubs, restaurants and bars will get a 40 per cent discount on their business rates bills from April, up to a maximum of £110,000 per business.
They are currently enjoying a 75 percent discount that then-Chancellor Rishi Sunak introduced in 2021 to boost the UK’s hospitality sector, which has been hit by closures and Covid-related trading restrictions.
Less generous: pubs, restaurants and bars will get a 40 per cent discount on their business rates bills from April, up to a maximum of £110,000 per business
As pandemic-related restrictions have ended, the industry has seen a wave of site closures due to rising energy prices, pressure on consumer spending and industrial action by rail workers.
Like other industries, hospitality bosses have long complained about the business rates regime, arguing it puts pressure on profitability and weighs heavily on bricks-and-mortar operators.
Reeves told the House of Commons that business rates were “a major concern” for large companies.
She accused the previous government of “creating a cliff” by failing to promise to extend temporary business rates relief beyond March next year.
In addition to the new 40 percent rate cut, Reeves announced plans to continuously reduce business rates multipliers between 2026 and 2027 for major retail, hospitality and leisure businesses.
She also said pubgoers would get ‘a penny on the pint’ if duty on draft products were cut by 1.7 per cent, impacting around two-thirds of drinks sold in pubs.
However, hospitality groups say costs will rise and the government is not providing enough support to the sector.
Simon Dodd, CEO of Young’s, said the reduction in national service ‘a small step towards reducing the enormous tax burden our sector faces.
“Unfortunately, given the other measures announced today, there are far 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 contributions will rise by 1.2 percentage points to 15 per cent, while the secondary threshold will fall from £9,100 to £5,000. According to Reeves, the measures would raise £25 billion a year.
At the same time, the national living wage will rise by 6.7 per cent to £12.21 per hour, and the minimum wage for 18 to 20 year olds will rise by 16.3 per cent to £10 per hour.
Conor Sheridan, CEO and founder of restaurant software provider Nory, believes the NLW increase “will have a huge impact on labor costs, which already represent a significant portion of operating costs for many locations.”
He added: ‘As we move forward, it is essential that the Government prioritizes measures that will help 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 more jobs in our communities.”
The hospitality industry employs 3.5 million people in Britain and contributes £93 billion to the country’s economy annually, according to trade body UKHospitality.
Kate Nicholls, chief executive, said: “This Budget is the latest blow to hospitality businesses. Rising taxes, rising costs and fragile consumer confidence threaten to bring growth to a standstill.’
However, she praised Reeves for following UKHospitality’s advice to permanently reduce hospitality business rates.
“Creating a level playing field in this way recognizes the importance of the high street and the role it plays in our communities and economy,” Nicholls added.
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