Spring Budget 2025: A wasted opportunity to support hospitality

Rachel Reeves delivered her first Spring Budget as Chancellor of the Exchequer, but hospitality businesses were left hoping for more support.

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The Spring Budget was always expected to be a low-key affair; there was no Red Box and no tax changes. Instead, there were only a few new policies aimed at correcting gaps in the public finances.

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The government insists this wasn't a significant economic event, but venue operators were looking to the budget for financial support.

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With no major tax changes or targetted relief, many venues now face rising costs of up to £100,000 in annual expenses per venue.

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Labour’s first budget in 15 years has only compounded the sector’s difficulties. Employers now face a 1.2% increase in National Insurance Contributions (NIC), a minimum wage hike, and a reduction in business rates relief from 75% to 40%

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This leaves a £3.4b annual increase to the sector’s tax bill.

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Hospitality Consultant Laura Anne said: “The problem that hospitality has at the minute, especially full-service restaurants, is the labour cost.

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“These businesses want to maintain great service, but they’re worried about paying higher salaries, which would take their offering away.

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“In my workshops, the one question everyone was panicking about was, ‘What do you advise us with the national National Insurance increase and the minimum wage going up?’

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“It's now a concern for everyone.”

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Michael Kill, CEO of the Night Time Industries Association (NTIA) highlighted the challenge: “Nothing frightens me more than the prospect of April.

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“We saw a 30% to 40% increase in operating costs up until the Autumn Budget, we're now going to see between 40 and 100 grand on top of those operating costs.

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“That's going to put a lot of people under pressure, and my concern is that those cash reserves will have to stretch a lot further come April, as businesses are feeling very fragile at the moment.”

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Despite calls from the NTIA for a VAT reduction to 15% and a reversal of the NIC increase, these measures were overlooked, where a report from the NTIA highlighted that 92% of nightlife businesses have already cut staff, operating hours, or essential investments, whilst 40% warn they will close within six months without urgent support.

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GigPig's Financial Director, Kiran Mehta, pointed out the knock-on-effects this could have on the customers, he said: “Venues operate on a really thin profit margin. So what else can business do other than past costs to customers?” Mehta said.

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“Labour’s manifesto stated they won't take cash out of people's pockets. But you tax businesses more, and then they put the prices up, it comes out of people's pockets.

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“If they pass these costs onto the customer, whose purchasings are pretty tight, you have a potential of a drop-off in footfall and end up in a vicious cycle.”

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Anne pointed to past government interventions as evidence of how targeted support can sustain the sector.

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“During COVID, with Eat Out To Help Out and the VAT relief to 5%, the profitability, the growth and the boost shows what a reduction in the VAT can do to sustain hospitality businesses,” she added.

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“There's a crisis, then you can implement it. We’re in a crisis now. Why can’t you implement it?

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“Over a year ago, most of my consultations were about growth for those businesses starting to come out of COVID.

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"In the last six months, 90% of my consultation calls have turned to panic, profitability, and we need help ahead of April's Budget announcements.”

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Since the pandemic, hospitality costs have soared by up to 40%, the number of pubs in England and Wales has fallen below 39,000 for the first time, and three nightclubs a week have permanently closed since March 2020.

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The hospitality sector contributes £93 billion annually to the UK economy and remains a vital part of British culture and community. While the current landscape presents challenges, it also offers opportunities for innovation. As Mehta noted:

“Consumer demand has changed. It’s no longer just about going to a pub, people want experiences.

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“You see this with Flight Club, the F1 Arcade in Birmingham, and live music venues. Some businesses will cut spending to protect margins, while others will double down on immersive experiences to drive footfall.”

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If anything has become transparent over the past financial year, is the resilience of the hospitality sector.

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Venues are constantly adapting to become problem solvers in the financial climate, where experience led operators are thriving within the sector.

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One of the biggest opportunities for hospitality businesses to adapt and thrive is by embracing live music as a key driver of sales and customer experience.

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Live music has always played an essential role in the UK’s nightlife economy, and forward-thinking venues are using it to attract customers, enhance their offerings, and allow them to stand out amongst competitors.

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With customer expectations higher than ever, experience-led venues are thriving, and live music is at the forefront of this shift, which is helping venues generate revenue, retain customers, and create memorable experiences.

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Reeves’ first Budget may not have delivered the support the industry was hoping for, but the resilience and creativity of hospitality businesses offer hope that the sector can adapt and succeed in an ever-changing financial climate.

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