Rising Costs and Concerns in the Hospitality Sector
The hospitality sector in the UK is facing a significant challenge as pubgoers are expected to pay £10 per pint and £20 for a burger in chain venues. Industry experts have warned that this increase is due to a new system of calculating business rates, which has led to higher tax bills for many businesses.
Hospitality bosses are expressing their frustration as they discover that their rateable values have been recalculated, leading to substantial increases in taxes from next year. Chancellor Rachel Reeves claimed that Labour was supporting the industry by scrapping the current 40% discount for hospitality and leisure businesses. Instead, a lower relief would be offered to those with a rateable value below £500,000.
However, many landlords are now facing unexpected tax bills. According to UK Hospitality, an average pub’s rates will be £4,500 higher in 2027/28 and £7,000 higher in 2028/29. Over three years, the average pub will pay an extra £12,900.
Sacha Lord, chair of the Night Time Industries Association, expressed his concerns about the current state of the hospitality industry. He mentioned that he has never seen the sector so demoralized. He also noted that some businesses may close after Christmas when VAT and rent payments are due.
Paul Crossman, owner of three venues in York and chair of the Campaign for Pubs, echoed these sentiments. He criticized the government for not delivering on its promise to scrap business rates and create a fairer system. He emphasized that the changes have not improved the current situation and that the industry is in a big crisis.
Crossman pointed out that the hospitality trade has struggled to recover since the pandemic and cannot cover the additional taxes imposed by Labour. He suggested that price increases might be the only solution, but customers may not accept them. He cited examples of people complaining about high prices on social media, indicating that affordability is a growing concern.
Mark Wrigley, owner of Atlas Bar in Manchester, has already made cutbacks to manage the increase in national insurance contributions (NICs) and the minimum wage. He explained that customers are reaching their limit regarding what they are willing to pay. He also mentioned that his business has had to make staff redundant, and the next step could be ceasing food services altogether.
Amy Bennetts, who runs The Seven Stars in Falmouth, Cornwall, said her business rate was set to double due to the Budget changes. She expressed her anger and fear of losing her family business, which has been in her family for 175 years. She predicts more price increases, having already raised the price of a pint by 30p in recent years.
Kevin Hannah, landlord of the Old Black Bull in Raskelf, North Yorkshire, mentioned that the cost of beef has increased by 35%, making it difficult for his business to remain profitable. He noted that people are becoming more cautious about spending, and he is unsure if his business will survive next year.
Lord, who has run music events and venues such as Parklife Festival and Sankeys in Manchester, highlighted that 40% of the cost of a pint already goes to the Treasury. He predicted that rising tax bills would lead to even higher prices, with pints potentially costing £10. He compared the UK’s alcohol duty to that of Germany, noting that it is 20 times higher.
He also warned about the potential for the sector to become more corporate and “sanitised” as independent venues close. He expects big chains like Starbucks, Gail’s, and Costa to take over smaller places, leading to a homogenized experience across the high street.
A Treasury spokesperson stated that the government is protecting pubs, restaurants, and cafés through a £4.3bn support package. They mentioned that without this support, pubs would face a 45% increase in total bills next year, which has been reduced to 4% due to the measures in place. This includes efforts to ease licensing, maintain alcohol duty on draught pints, and cap corporation tax.