Autumn Budget: What does it mean for hospitality businesses?

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As the dust settles from last week’s budget and the headlines start to die down, we’re taking stock of the Chancellor’s Autumn Budget announcements and setting out what her speech really means for hospitality business owners.

Rachel Reeves announced last week that the tax rate for hospitality businesses in properties worth under 500k will be the lowest it’s been since 2010/11, with millions in ‘transition’ relief being given to the industry to offset the wind-down of COVID-19 relief funds. A 5p discount on business rates will also be implemented for hospitality operators.

However, despite discounts and capped bills, UK Hospitality has said the high street has been ‘disproportionally hit’, and Drinks Business reports that an extra 30 million pints will need to be sold to cover rising costs.

Here, we unpack the announcement and discuss the impending changes to understand exactly how the new measures will impact our customers.

National Living Wage

The minimum wage is set to rise by 50p per hour to £12.71, and by 85p per hour for 18–20-year-olds, from April 2026. That’s £900 extra per year for a full-time adult worker. While great for employed staff, this change will put additional pressure on hospitality businesses, especially those that employ young people.

Critics say this increase will result in higher food and drink prices for customers, as businesses are unable to absorb the cost of higher wages.

Hospitality Zones

After testing this measure in London, hospitality zones will be introduced across the country to cut red tape and encourage growth in the nighttime economy. These zones will enable the fast-track of applications for street parties, al fresco dining and extended licensing hours, helping to encourage more people into pubs, bars and restaurants in urban centres in the evenings.

Alcohol Duty and Sugar Tax

Tax on F&B goods is also set to rise. Alcohol duty rates are set to increase to 3.66% in line with national inflation, while the sugar tax is being extended to milk-based drinks, including pre-packaged coffees and milkshakes, having a knock-on effect for customers. It’s important to note, however, that milkshakes made freshly in-house will be exempt from the tax rise.

Tourist Tax

Tourist tax is a fee that applies to visitors staying in hotels and short-term accommodation, and is already implemented in some UK cities, such as Manchester and Edinburgh, and is widely used across Europe in many popular tourist destinations.

The proposed change will give English Mayors the power to implement tourism levies in their cities if they choose. The research shows that the argument for this tax is to raise millions for local economies, supporting local businesses to boost and sustain growth. This has been seen in Manchester, where £2.8 million was raised last year from the city’s Visitor Charge, a £1 per room, per night fee, which was introduced in April 2023.

UK Hospitality, however, argues that every tourist tax will inevitably be passed on to visitors to these cities by hotels, deterring both UK and international guests from travelling and therefore damaging the tourism industry.

Free Apprenticeship Training

The chancellor also announced that funding for training apprenticeships for those under 25 would now be completely free for small and medium-sized enterprises.

This means that hospitality businesses looking to train chefs, front-of-house staff, wait staff, baristas and sommeliers on the job will benefit from reduced costs and better staff retention, whilst providing young people with more opportunities for career growth and development.

How software and operations optimisation can help battle rising costs

With the budget throwing businesses a mixed bag of results this Autumn, it looks like costs will most likely continue to rise for most. Despite some respite for the industry, increased tax, wage bills and food costs may continue to impact bottom lines if operations aren’t optimised properly, creating an uncertain outlook for the coming months.

But in spite of the challenges facing the industry, hospitality businesses can weather the storm and reduce economic stress with specialist technology like Kitchen CUT. Here are just some of the ways that technology can help:

• Procurement and purchasing software: Simplify purchasing by using software to compare costs and find the best deals from top suppliers. Streamline multiple orders into a single order to strengthen supplier relationships and increase bulk orders to save money.
• Reduce food costs with menu engineering: Identify your best-performing dishes and those which aren’t returning a profit. Identify costs per item in real-time, based on your most and least ordered dishes and then delete the dishes that don’t sell.
• Waste management tools: Cut your silent profit killer. Implement simple routines to track and record waste across multiple sites, identify trends, and determine which dishes generate the most waste, enabling actionable change.
• Inventory management software: Help your staff to calculate stock levels across all stores automatically, place more accurate orders and reduce hours spent performing laborious stock takes. Inventory management software minimises human errors and accurately automates essential produce orders, reducing food waste.
• Business intelligence reporting: Reduce the time and resources spent on admin and understand where your business is losing money, how much it’s spending on food, what is costing the most, and where it can make savings.

With transparent processes in place, hospitality businesses can keep costs down and reduce knock-on costs for consumers, thereby retaining customers and boosting profits.

For more information about this year’s budget and the impact it may have on hospitality businesses, visit the UK Hospitality website.