Business rates cut, but Budget frustrates hospitality

The chancellor Rachel Reeves has announced a permanent cut to business rates as part of the eagerly awaited Autumn Budget.

During her address to parliament, Reeves said that the government will introduce permanently lower tax rates for over 750,000 retail, hospitality and leisure properties, paid for through higher rates on properties worth £500,000 or more, such as "warehouses used by online retail giants".

The government says the cut is worth nearly £900m a year from April 2026.

The move will be seen as addressing one of the ‘big three’ issues raised by the hospitality industry in the build-up to the Budget. The other two, which weren’t mentioned, being a cut in VAT and reversing the employer National Insurance Contributions hike, announced in the chancellor’s previous Budget. 

Many across the sector have called for lower business rates to revive high streets, by delivering the maximum discount for hospitality properties under £500,000 rateable value. 

Wages

Ahead of the Budget, the government also announced that from April 2026 the National Living Wage will increase to £12.71, an increase of 4.1%.

The wage rate for 18- to 20-year-olds will increase to £10.85, a higher-than-expected increase of 8.5%.

In total, the wage increases represent a total £1.4bn in additional cost for hospitality businesses, according to UKHopsitality. 

“Our teams sit right at the heart of every Young’s pub," says Simon Dodd, CEO of Young’s. "We are proud to back fair pay, but these wage increases land another £1.4bn blow to our sector, adding to the significant pressure we are already grappling with." 

Alcohol duty

While Reeves made no direct mention of alcohol duty in her speech, an Office for Budget Responsibility's report calculated that alcohol duty receipts are expected to raise £12bn in 2025-26, a 5.1% decrease. It goes on to say these receipts will then increase by 3.4% each year, reaching £14bn by 2030-31 due to increases in the duty rate.

"The government has not gone far enough to tackle the other unfair costs weighing down pubs - and has added more pressure with the rise in alcohol duty, so it will continue to be challenging for pubs to keep rewarding our people and keep doors open," adds Dodd.

"As a result, it will just get harder for young people to find jobs in an industry that’s always been a major employer for them."

Deeply concerning

Chris Gamm, CEO at Springboard, says the Autumn Budget is deeply concerning for the hospitality industry.

"With the minimum wage set to increase and a freeze on income tax and NI thresholds extended, we expect entry-level hospitality roles to decrease and further job losses to follow. We also predict the long-term effects of this will mean, in time, there will be a shortage of future managers and leaders.

"This will put immense pressure on the sector and on charities like Springboard, which are committed to training and supporting people into work. We urge the government to work closely with us and the wider industry to ensure adequate support is put in place to protect jobs, sustain training and development, and safeguard the long-term resilience of this essential sector."

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