Hospitality sector warns budget-driven rates hike will weigh on pubs, hotels

Hospitality groups say Labour's business rates reform, unveiled in last month's Budget, risks turning a holiday-season cheer into a nightmare for pubs, restaurants and hotels. UK Hospitality chief Kate Nicholls said the sector faces forecast rate increases that will strain cash flow, force job losses and accelerate closures. The group notes that even with the transitional relief announced by the government, an average pub could see its rates bill rise by about £1,400 next year, with three-year costs climbing to £12,400. For a typical hotel, the annual hit would reach roughly £28,900 next year, and total to about £111,300 by year three, translating into frontline job losses and reduced hours for workers.

Taken together, the changes would lift a typical pub's bill significantly and would contribute to a wider pattern of higher costs for hospitality properties as revaluations roll in. The industry points to a 76% rise for pubs and a 115% rise for hotels, even after the £4.3 billion transitional relief package is applied. The sector's overall rates bill is projected to rise by about 4% despite relief, as property revaluations outpace the cap. Nicholls warned that online retailers, warehouses and office blocks face smaller increases under the reforms, which critics say widens the gap between the high street and digital giants. The government says the relief is meant to cushion the impact across the economy, not just hospitality, but industry groups say the sector bears a disproportionate burden that could accelerate closures and job losses.

The group notes that Labour had promised to level the playing field between online giants and high street businesses, but argues the current framework falls short of that goal. Nicholls said property revaluations would rise significantly given Covid-era comparisons and urged Ministers to apply the maximum hospitality discount or freeze rateable values for hospitality properties at 2023 levels to give operators time to adapt. She advocated a targeted increase in the hospitality discount to 20p in the pound or a freeze on valuations, arguing these steps would help protect high streets and support job creation.

Analysts and operators caution that price increases will likely be passed on to consumers, exacerbating pressures on households and potentially reducing patronage at pubs and restaurants. Nicholls warned that small operators, many of which operate on thin margins, could face difficult choices between higher costs and reduced hours or staffing cuts. Critics say the Budget’s approach risks misalignment with the government’s broader aims to support high streets and local economies, and that without timely reform, the sector could see further business closures and fewer choices for consumers.

In response, industry advocates say the government has the tools to repair the system before it inflicts lasting damage on town centers and coastal economies. Several operators welcomed relief for small businesses but stressed that more root-and-branch reform is needed to reset the rates framework. The hospitality sector continues to urge policymakers to align the policy with the manifesto promise of leveling the playing field, protect jobs, and safeguard the vibrant, affordable local dining and lodging scene that supports tourism and local economies across the country. If the reforms are not adjusted, industry observers fear the long-term impact on consumer choice and the vitality of high streets could be substantial, even as the economy seeks to rebound from the pandemic era and navigate ongoing cost pressures.