Spring Budget 2025: A wasted opportunity to support hospitality

Rachel Reeves delivered her first Spring Budget as Chancellor of the Exchequer, yet failed to deliver the financial support hospitality businesses needed.

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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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It was a missed opportunity for Reeves, who did not address the industry and overlooked requests to postpone rising financial pressures that could lead to an additional £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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Coming into this budget, if intervention wasn’t made, hospitality venues would have to face insurmountable cost increases primarily due to the measures introduced in the Autumn Budget.

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Michael Kill, CEO of the Night Time Industries Association (NTIA) said: “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.

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“There is a huge concern that this is going to impact the economy in the UK but more significantly, that businesses at the sharpest end, which is hospitality, night-time economy and some of the cultural small and medium enterprise businesses, which all are feeling very fragile at the moment.”

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The NTIA’s calls for a reduction in VAT to 15% and a reversal on the NIC increase were ignored after the organisation 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, warned that businesses will have no choice but to pass these additional costs onto consumers.

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“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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Despite the sector contributing £93 billion annually to the UK economy, the Chancellor failed to acknowledge its struggles.

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Mehta believes the industry’s survival hinges on adaptation:

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“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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A survey by Bionic found that 44% of UK hospitality business owners fear they may cease trading this year, with 43% citing the National Insurance rise as their biggest concern.

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These statistics underline the urgent need for government support, yet with key tax hikes set to take effect in just six days, the sector is left bracing for impact.

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Rachel Reeves had the opportunity to ensure stability and growth in one of the UK’s most vital industries. Instead, her first Spring Budget left hospitality on the brink.

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