With the hospitality sector being the sixth-largest employer in the UK, it is one of the British economy’s most important industries. However, successive governments have abandoned it, seemingly wanting to avoid what has fast become a divisive and extremely challenging puzzle. As wage bills, production costs and tax burdens soar, it is pivotal we ask what the government needs to do for the hospitality industry. As we will soon see a new Prime Minister enter Downing Street, hospitality must become one of their government’s top priorities.
Around 350,000 young people are employed in hospitality in the UK according to the Office for National Statistics, and the loss of so many more businesses as costs tighten even further will prove devastating for young people. The security of flexible, part-time employment that makes the industry so attractive may be lost for many, pushing university students and prospective students to reconsider continuing or beginning studies, as the cost of living soars. This is even without the additional prospect of the 2025 budget costing the UK around 110,000 jobs overall in the year after- showing just how vulnerable businesses are. These job losses show how significant the financial pressures are for hospitality, and much must be done to protect the industry.
The pub, a cornerstone of British society that has bound people together for years, faces an existential threat to its existence. As the number of pubs has fallen from 60,000 in the early 2000s to roughly 45,000 in 2024, this drop of a quarter shows the collapse of one of Britain’s favourite afternoons and evening pastimes. With pubs and what they serve being so heavily taxed, they are facing the most severe crunch of the cost rises that are impacting the sector.
This has pushed prices up, causing many to avoid pubs due to the higher costs of drinks, especially as household disposable income has fallen. Here lies the most important need for action- cuts to National Insurance, beer duty and VAT will provide relief for many pubs. The cuts will ease pressures and improve profit margins, allowing more pubs to be profitable again. While this will cost the treasury much and may well expend significant political capital for the new chancellor as they must justify likely extra borrowing in the short term, the cuts will rescue a British staple. Further, increased pub use will create the need for more staff, which will reverse the job losses in the sector and will support British producers. Pubs will then be able to provide more stock, creating jobs not just in hospitality but also in production of alcohol and foods. This will provide support to many British businesses, because – as demand increases – so will the need for more jobs to maintain the supply.
Tighter controls must be introduced on PubCos (pub companies). These are the chains that own and manage pubs or lease them out to landlords across the UK to operate under PubCo supervision. However, they also will contractually block pubs from purchasing stock on the open market, so can therefore supply the pubs themselves at often inflated prices of their choosing. This can effectively become another form of rent to the leaseholder, and further limits profits for the landlord who currently has the lease, leading to closures as there is no way to remedy financial burdens as it is difficult for the landlord to explore purchasing cheap alternatives. Stopping PubCos from contractually obliging tenants to only purchase from them as the supplier would greatly benefit pubs, allowing them to operate with a little more freedom and will allow more cost-effective purchasing.
Backing Tom Kerridge’s #VATsTheProblem campaign should be a priority for the incoming Prime Minister. VAT has harmed restaurants, alongside the rising staff, produce and energy costs. While this cut is very expensive for the treasury and the incoming Chancellor may fear implementing such a major cost on the treasury, efficiency saving across Whitehall that have so often been proposed could finally be implemented. This would help make the expenditure more palatable, and lead to VAT being incrementally cut to 12.5%. This would save restaurants significant tax burdens and allow them to operate with healthier margins. Further, this would help reduce prices, as costs would be lowered due to the limit of VAT.
Tax support alone will not rescue Britain’s ailing hospitality industry. The sector’s struggles to adapt to the digital age also require the support of the government to ensure successful modernisation. A survey by Cardiff Metropolitan University found that half of hospitality organisations quizzed did not provide any digital training. This leaves many older and less digitally confident employees at a disadvantage. These can inhibit their ability to perform tasks on more complex POS systems efficiently, as well as the more digital nature of ordering and auditing being arduous for some who do not have technological confidence. This places businesses at a disadvantage that must be remedied by government support. Smaller businesses may not be able to provide training affordably, so the government must begin an initiative to support training of management staff in digital aspects of roles. This can then equip senior staff to pass on training, assuring that hospitality can keep up with the digital business world that it struggles to inhabit harmoniously.
Hospitality seems to have been virtually forgotten by successive governments over the last 20 years, and urgent action is now needed to support the sector. This can be achieved through targeted cuts and support for businesses, so that a key part of British life and a major employer can ensure its future is prosperous. Rescuing hospitality is not only a financial matter but will protect communities too.
