In the last Budget, Labour increased National Insurance, cut business rates relief and imposed a 6.7% increase on the National Living Wage.
These changes, coupled with the red tape coming forward in the Employment Rights Bill, have created a toxic concoction that is having a negative impact on businesses.
One of the sectors feeling this burden the most is hospitality, such as cafes, hotels and pubs.
What happened?
Kate Nicholls, Chair of UKHospitality, explains well “Last year’s Budget increased costs dramatically. It added £3.4bn to hospitality’s annual costs and, crucially, made the cost of employing people significantly more expensive.”
Figures published this week show that in the nine months since Rachel Reeves’s first Budget, the hospitality sector lost 89,000 jobs – accounting for 54% of total job losses (165,000) since the Budget.
Why does it matter?
Hospitality is deeply rooted in every village, town and city.
Pubs, cafes, hotels and restaurants, whether it be through their employment of local people or the social contact they provide, are a crucial part of our communities.
And we know that in rural areas such as ours, these small businesses are far more than a convenient place to meet friends and family; they can sometimes be the only opportunity for people to get out of the house and speak to someone else.
What’s the knock-on effect?
A survey of hospitality businesses published this week shows that:
- 76% of businesses have had to increase prices,
- 1/3 are restricting opening hours, and
- 63% have reduced hours available to staff.
This means the additional costs that businesses can’t absorb are being passed on to you, helping to drive up inflation (now 3.8%, up from 2% at the time of the General Election) and exacerbate cost of living pressures.
The pubs and cafes that people rely on for social contact are opening less and less, or worse, being forced to close for good (more than 200 pubs shut in the first six months of 2025, an average of 8 per week).
People are having to look elsewhere for extra hours or seek new jobs altogether. But with unemployment up 10% and job openings falling by -5.8%, people are struggling and being forced to look towards the State for support (an increase of 500,000 people claiming out-of-work benefits under this Government).
There is uncertainty around the Budget and whether Rachel Reeves -to fill a £50bn black hole of the Government's own creation- will borrow more, cut spending or increase taxes... we'll find out in October / November.
