Labour’s first Budget in 14 years promised a ‘decade of renewal and more pounds in people’s pockets’.

In reality, it’s dealt several swift blows for foodservice and hospitality. Reeves announced a £40bn tax increase in the Budget. And businesses are set to bear the brunt.

Here, we take a closer look at today’s ‘rebalance of the budget’. The key takeouts for hospitality. And how industry has reacted.

The biggest issues facing foodservice & hospitality

Hike in employer National Insurance

As widely expected, the chancellor has increased employers’ National Insurance Contributions but decreased the threshold at which businesses start paying from £9,100 to £5,000.

Employers’ National Insurance contributions will rise from 13.8% to 15%. The moves will raise £25bn.

Reeves said: “I know that this is a difficult choice. I do not take this decision lightly.”

Increase to Employment Allowance

Reeves announced increases to Employment Allowance to help smaller businesses.

The allowance will increase from £5,000 to £10,500, which the chancellor says will mean almost 900,000 employers won’t pay any National Insurance at all next year.

Bump to National Minimum Wage

The Government will move towards a single adult rate for the minimum wage.

The new Real Living Wage rate was announced on 23 October – set at £13.85 in London and £12.60 across the UK.

Reeves announced the National Living Wage for people aged 21 or older will rise by 6.7% from £11.44 an hour to £12.21 from next April.

In addition, the National Minimum Wage will rise for people aged between 18 and 20-years old from £8.60 to £10.

Apprentices will see the biggest pay spike, with hourly pay increasing from £6.40 to £7.55.

Extension on business rates relief for retail & hospitality

Some respite was announced in the form of business rates relief.

Reeves said: “From 2026-27, we intend to introduce two permanently lower tax rates for retail, hospitality and leisure properties which make up the backbone of high streets across the country, and it is our intention that is paid for by a higher multiplier for the most valuable properties.

“But the previous government created a cliff edge next year, as temporary relief ends so I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26 up to a cap of £110,000 per business. Alongside this, the small business tax multiplier will be frozen next year.”

Alcohol duty: a penny off a pint BUT increase in duty

Alcohol duty rates on non-draught products will increase in line with RPI from February next year. In real terms, a cut of 1.7%, which equates to a penny off a pint in a pub.

However, more widely, other alcohol duty will increase by 2.7%.

Inflation predictions

Reeves set out inflation predictions saying the OBR say CPI inflation will average:

• 2.5% in 2024
• 2.6% in 2025
• 2.3% in 2026
• 2.1% in 2027
• 2.1% in 2028
• 2.0% in 2029

Industry reaction: the impact of the Budget

In statements released this afternoon to media, the industry’s leaders and associations and William Murray’s commercial director, reacted to the Budget.

Kate Nicholls, CEO UKHospitality, said:

“This Budget is the latest blow for hospitality businesses. Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.

“In the short-term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it. Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses. Avoiding the business rates cliff-edge next April was critical and it was important that some relief has been extended. However, the reduced level of 40% is another cost that

businesses have to deal with. For those small- and medium-sized operators, their rates bills will still go up in April. All of this means that 2025 will be painful for hospitality, with an increased annual tax bill of £3 billion for the sector.

“However, there are reasons for longer-term positivity. I am pleased that the chancellor is implementing UKHospitality’s recommendation for a permanently lower level of business rates for hospitality. Levelling the playing field in this way recognises the importance of the high street and the role it plays in our communities and economy.”

Steve Alton, chief executive, British Institute of Innkeeping, said:

“These are businesses at the heart of their communities, who have invested heavily since the pandemic in their pubs, making them safe, welcoming spaces, open to all. As we head towards the festive period, they will continue to ensure their customers can connect with friends, family and their wider community, but the quieter winter months will be incredibly tough, especially with lower rate relief of 40% on business rates, as well as increased employment costs. Without this investment in their futures, we stand to lose many more of these unique and essential community hubs.”

Sacha Lord, Manchester’s night-time economy advisor, said:

“This budget has shown that treating all businesses the same is just no longer sustainable. Restaurants, hotels, pubs, and bars operate on an entirely different model than the leisure and retail sectors, yet our businesses are being treated, taxed and regulated in the same manner. The high street has changed, and the way we approach budgetary decisions and policies must too.

“Increases to employers’ national insurance and the minimum wage will place even more strain on business owners. Increasing these costs without providing support for them to do is a broken model and will only ever lead to more businesses shutting their doors. Business rate reliefs have been a lifeline for hospitality over the past few years. The partial extension of this relief from 75% to 40% will save jobs, but this will still not be enough for many, and we will see restaurants and bars now facing unsustainable increases to their rates bills.”

Chris Dines, commercial director, William Murray PR & Marketing, said:

“At a macro level, the outlook for consumer spending won’t be hit hard by this budget. It’s a more benign environment as well, with some mediocre growth forecast, stable inflation and a likely drop in interest rates.

“It seems to be a budget designed specifically to hurt businesses that employ plenty of lower paid, younger, staff in industries with high attrition. The Employer NI changes have a disproportionate impact in such a scenario, so take the example of a business employing 100 staff on an average £25,000 salary. A rough calculation suggests that the business will incur £215,000 of Employer NI this tax year, and £290,000 next. That hike, equivalent to three extra staff, is largely down to changing the cut-in salary for when

Employer NI is charged. This is all before the impact of raising minimum living wages significantly, with the biggest hike on staff under the age of 21.

“None of this extra cost will be re-invested into business enterprise.”