What does the 2025 autumn Budget mean for UK hospitality?
The UK’s hospitality sector entered this year’s autumn Budget with a clear list of priorities: relief on labour costs, meaningful reform of business rates, a reduction in VAT, and targeted support for training, apprenticeships and investment.
Today’s announcements by Chancellor of the Exchequer Rachel Reeves delivered only limited wins - and, in several areas, added further pressure to an industry already operating on some of the tightest margins in the economy.
One of the most immediate challenges is the rise in employer National Insurance contributions on earnings above £50,270.
While most frontline staff will not be affected, this increase directly impacts senior chefs, managers, hotel leadership teams and multi-site operators. It compounds the wider effect of rising wage costs across the sector.
Initial reaction
Reflecting that mood, Kate Nicholls, chair of UKHospitality, said: “Increases to minimum wage rates are yet another cost for hospitality businesses to balance, at a time when they are already being taxed out."
Labour market pressure was also highlighted in early reaction from the industry.
Dan Maimone, head of global customer experience at Harri, the AI workforce management platform used by brands from McDonald’s to Mitchells & Butlers, said: “The Budget confirms the hospitality sector’s biggest fears, staffing costs will continue to rise with little support for the businesses expected to absorb them.
"Labour already represents up to 45% of operating costs, an uplift to £12.71 will materially impact hiring, scheduling, progression, and profitability across hospitality, ultimately hitting workers as well as businesses.
"According to trade body UKHospitality, the increase will add roughly £1.4 billion in additional costs across the sector.
"Operators cannot continue absorbing these increases alone. Without targeted support, businesses will be forced to scale back hours, reduce hiring, or increase prices."
No change on VAT
Perhaps the biggest disappointment for hospitality is the government’s decision not to reduce VAT.
Trade bodies had strongly argued for a sector-specific rate or temporary cut to stimulate demand and ease margin pressure. VAT remains at 20% — a significant blow to operators already constrained by rising food costs, utilities and labour.
Business rates
On business rates, the immediate measure announced is the extension of the existing retail, hospitality and leisure relief. This avoids a cliff-edge for operators this year, but the relief level
itself has not been increased.
However, the Chancellor also used her speech to confirm a long-term structural change: the introduction of permanently lower business rates for retail, hospitality and leisure, funded by higher levies on large commercial properties, including warehouses used by online giants.
At the time of writing, the exact rate is yet to be published, but early expectations suggest the current 40% relief could be frozen or permanently set at 20%.
This dual approach means operators receive stability in the short term, with a promise of structural support in the future — though the final value of that support remains dependent on the forthcoming rate announcement.
Among independent operators, the reaction has been cautious.
James Gilhooley, founder of Cornerstone Kitchen, said: “Today’s Budget offers some welcome recognition of the pressures facing hospitality, but it doesn’t go far enough for a sector that continues to operate on some of the tightest margins in the UK.
“We’re pleased to see continued business-rates support for smaller hospitality and retail premises - it’s a vital lifeline for independent venues and high-street operators who have weathered years of rising costs.
“Any measure that eases the fixed-cost burden helps businesses focus on what matters: investing in people, improving guest experience, and driving local economic growth.
“However, the increases in wage costs and the potential introduction of tourism levies add another layer of pressure to a sector already stretched by supplier inflation, staffing challenges and sustained energy costs.
“Today’s measures are a step but not yet the stride the industry needs.”
Alcohol duty
There looks set to be a freeze on alcohol duty, preventing an automatic spike in drink prices and offering short-term breathing room, but it is set to rise in line with inflation.
The Budget also provides no new support for energy-intensive hospitality businesses, nor targeted grants for sustainable kitchen upgrades or capital investment.
Meanwhile, the absence of apprenticeship or training incentives is a significant concern. For organisations supporting people into hospitality — from young jobseekers to career changers — this represents another missed opportunity to address long-term workforce shortages.
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What does the 2025 autumn Budget mean for UK hospitality?
