Conservatives for Hospitality believe that a strong and thriving hospitality sector is a vital part of a successful and thriving UK economy. We recognise the importance of the sector as an investor, a tax contributor and employer; this is of particular importance in more remote rural communities, where employment is scarce or partly seasonal.
A recent report from the non-political industry group Hospitality UK[1], shows the crucial contribution the sector makes to the UK economy:
- In the past six years, hospitality has increased its annual economic contribution by £20 billion to £93 billion.
- Since 2016, employment in the sector has risen to 3.5 million, making hospitality the third largest employer in the country.
- Hospitality contributed £54 billion in tax receipts to the Treasury last year.
- The sector generated £20 billion worth of exports in 2022.
- Hospitality attracted £7 billion worth of business investment last year.
The sector right now
Auditor Grant Thornton estimated in their December 2025 report, that since March 2020, there have been 62 net closures of hospitality businesses per month, leaving the sector 14.2% smaller[2].
In a further blow to an industry increasingly dominated by national or international chains, independent and casual dining restaurants have closed in record numbers reducing by almost 23% compared to pre-Covid-19.
Rather than valuing and recognising the importance both as an employer and contributor to the Exchequer, this Labour Government have introduced a series of measures that could not have been better designed to persecute British hospitality businesses.
This Government’s record is stark.
– Business rates
The 2025 November Budget was a ‘bait and switch’ maneovure. The Government introduced a permanently lower multiplier for business rates (5p below standard rates), but the rateable value of some properties will increase significantly:
– 76% for accommodation businesses
– 30% for pubs
– 14% for restaurants and cafes
This rise in rateable values means many businesses will see their overall tax bills rise inexorably, despite the reduced multiplier.
The Government announced a £3.2 billion transitional relief scheme to support businesses paying higher rates. But analysis by UK Hospitality has found that an average pub’s business rates will increase 15%, still taking into account the reduced multiplier and transitional relief.
Minimum wage increases
Employment costs will rise further from April 2026:
· National living wage will rise to £12.71 (+50p)
· National minimum wage for 19–20 year olds will increase to £10.85 (+85p)
· Wages for 16–17 year olds and apprentices will rise to £8.00 (+55p)
This comes in addition to the sector absorbing significant wage and National Insurance contribution (NIC) increases, introduced in the Chancellor’s first Budget in April 2025, which cost the sector £3.4 billion.
There’s real concern in the sector that these additional labour costs will erode profitability and business closures could escalate, reducing yet further employment opportunities in some of the most deprived communities in the UK.
Alcohol duty and tourist tax
Further cost increases announced in the 2025 Autumn Budget include:
· Alcohol duty to rise with RPI (3.55%) from February 2026 – directly impacting margins for restaurants, pubs and bars
· Tourist tax powers granted to mayors in England
Industry players say that while the tourist tax is similar to measures in Europe, businesses there pay much lower rates of VAT, meaning UK firms are being impacted by both higher VAT levels and newly introduced tourism taxes. This is likely to make the UK less attractive for tourists.
Freeze on income tax thresholds
Together with an inexorable rise in the cost of doing business, hospitality firms have also had to contend with lower consumer spend due to the cost of living.
The extension of the freeze on income tax thresholds to 2030-2031 will push more people into higher tax brackets, reducing discretionary spending further.
Hospitality firms face tougher competition for a shrinking pool of consumer spend and must make difficult choices around setting prices that maintain margins but risk turning consumers away, or discounting prices but risking profitability.
[1] Go to the Hospitality UK website for more figures: https://www.ukhospitality.org.uk/insight/economic-contribution-of-hospitality/
[2] https://www.grantthornton.co.uk/insights/uk-hospitality-autumn-budget-fails-to-impress/