A Nightmare Before Christmas: Hospitality warns Labour's business rates reform will crush sector

Hospitality leaders warned Thursday that Labour's approach to business rates reform, reinforced by the latest Budget, could dramatically raise bills for pubs, restaurants and hotels and threaten operations across the country. Kate Nicholls, chair of UK Hospitality, described the outlook as a “nightmare before Christmas” for an industry already stretched by rising costs and labor shortages. The warning comes as the sector absorbs a suite of changes meant to reshape how business rates are assessed and phased in over the next three years.

The scale of the impact, according to UK Hospitality’s analysis, would be felt most acutely by front-line venues. An average pub is projected to see its rates bill rise by about £1,400 next year, with a cumulative increase of around £12,400 over three years. For hotels, the punch would be more severe: about £28,900 more next year and roughly £111,300 over three years. In total, UK Hospitality estimates an additional £205,200 in rates for a typical hospitality business across the three-year horizon, a path that Nicholls said could translate into fewer staff, higher prices for customers and, in some cases, closures. The rises are reported to amount to roughly a 76% increase for pubs and a 115% increase for hotels, even after the government’s £4.3 billion transitional relief package intended to soften the shock across the economy.

The Treasury and tax authorities have framed the relief as a cap on year-to-year bill increases, but Nicholls warned that any increase is still an increase and would be felt directly by customers as higher prices or by owners absorbing costs through reduced staff hours or vacancies. The government has argued that property revaluations would rise significantly due to Covid-era baselines, necessitating discounts to hospitality properties to preserve competitiveness. Ministers have signaled that the sector’s overall business rates bill would rise by about 4% in the coming year, a combination Nicholls said fails to reflect the sector’s current fragility and the cost pressures already in play.

The package of reforms comes with a broader political debate about “leveling up” high streets and extending relief to smaller, community-focused venues. Nicholls asserted that online retail giants, office blocks and out-of-town supermarkets appear to be benefiting from more favorable treatment under the current regime, while traditional bricks-and-mortar hospitality venues face steeper increases. She argued that the Labour Party’s manifesto pledge to level the playing field “is not happening” under the current framework, a point she underscored as the government seeks to deliver on its broader economic goals while maintaining competitive pressure on high streets.

The government’s approach has intensified concerns about closures and job losses in an industry that relies heavily on young workers and families balancing work with childcare or caregiving duties. Nicholls highlighted that the knock-on effect would be felt in hiring, training pipelines and consumer options, with higher costs linked to meals, pints and hotel stays likely to be passed on to customers.

Observers note that the reforms are being rolled out amid a tight budget cycle and a period of economic readjustment following the pandemic and inflationary pressure. The industry’s call for changes is framed as a matter of protecting community amenities and sustaining local economies that often rely on hospitality as a core economic engine. Nicholls argued that with the right adjustments—such as slowing rate increases or extending targeted relief—government policy could still meet its manifesto promises without sacrificing the vitality of high streets.

As the reform timeline continues, UK Hospitality urged policymakers to consider two concrete steps: either raise the hospitality discount to a more protective 20p in the pound or freeze rateable values for hospitality businesses at 2023 levels. Such measures, Nicholls said, would give operators a window to adjust, plan and invest in improving the customer experience rather than facing a squeeze that could deepen closures and job losses. The industry’s plea is aligned with a broader desire to stabilize consumer costs and preserve a dense, accessible network of venues that anchor local economies.

The sector’s leadership emphasized that the government has the power to recalibrate policy to better reflect hospitality’s role in the economy and in community life. “The Government has the power to fix this,” Nicholls said, urging a timely shift to safeguard high streets and the jobs they support. “You’ll miss them when they’re gone.”