After the Budget: How We Respond

When the Chancellor sat down on 28 October, the most telling thing about the speech was where the help had landed. Almost all of it went to the building: higher thresholds, frozen bills and bigger reliefs on the property you trade from. Almost none of it went to the people running the businesses inside the buildings, whose wage bills rise again from April, with no change to the National Insurance paid on top of them, and no cut to the VAT on everything they serve.

But the rates gesture is not nothing, and after two Budgets that delivered nothing at all, it would be churlish to pretend otherwise. Allen Simpson of UKHospitality called it "the first budget in several years to deliver any positive news for hospitality at all", and he is right to an extent. But for most independent restaurants, bars and cafés, the money saved on rates will be small, and the money spent on payroll will be large, which is why we think the important conversation is not about what we’ve won or lost, but how to keep the team you already have.

So what did we actually win?

The headline win is on business rates in England. From April 2027, small business rates relief for retail, hospitality and leisure properties will cover rateable values up to £18,000 in full, up from £12,000, tapering away by £21,000, which the Treasury says will take around 70,000 more businesses out of rates altogether. That is a more generous threshold than the £17,096 that was being floated before the Budget, and for a small café, bakery or neighbourhood restaurant on a modest valuation, it could mean a bill disappearing entirely.

Everyone above the threshold gets a two year freeze in real terms, which is welcome. But it’s also worth reading carefully, because although a bill that rises with inflation is flat on paper, it’s not quite flat on your bank statement. Pubs and live music venues did best of all, with their relief rising to 35% from April, up from the 20% promised in July, alongside £10 million of duty relief for around 2,000 small brewers and cider makers.

The catch is reach. Restaurants and hotels of any real size are still waiting for the pub-style relief that would make a meaningful difference to them, and Andy Lennox of Fired Up Collective reckons the threshold change "helped just 2.9% of hospitality venues". Markus Thesleff, founder of Thesleff Group, was blunter still: "The higher rates threshold does nothing for businesses of any real size." If your rateable value sits anywhere below £21,000, it is worth checking with your council now how the relief will be applied, rather than discovering in April that it hasn't been.

This was intentional of course -  the wider the reach, the less money the taxes generate for the government, at a moment where the demands on their finances are diverse and intense. Their calculation will have been that this would help the smallest businesses, which are often the most precarious. The outcry is because every other business is precarious too.

And what did it cost us?

The losses were largely the ones we had braced for. VAT stays at 20%, despite more than 400,000 people signing the petition for a 10% rate. Employer National Insurance stays at 15% on earnings above £5,000, with no move on the threshold that UKHospitality had been pushing for. The National Living Wage rises by 3.9% from 1 April 2027, from £12.71 to £13.21 an hour, a touch above the £13.18 that was the central estimate going in, and the rate for 18 to 20 year olds rises by the same proportion to £11.27. Alcohol duty goes up with RPI from 1 February, and from 2028 mayors will be able to charge an overnight visitor levy, which will land hardest on hotels and anyone who relies on tourists.

Steve Alton of the British Institute of Innkeeping worked out that the wage rise alone "means an average of £1,000 more for every full-time member of staff from April 2027", at a time when only one in four pubs is turning a profit. James Robson, co-owner of Fallow, Roe and Fowl, put the combined cost of wages and National Insurance to his group at £550,000 a year, and called it "a stagnation budget" that followed two anti-growth ones. But Michael Kill of the Night-Time Industries Association made the wider point that "the damage accumulated over many years cannot be reversed through a single fiscal statement", which is hard to argue with.

None of this should come as a shock to anyone who was planning on the basis that no rescue was coming. What it does do, though, is make it very clear where the pressure will sit next year.

Why is the wage bill the real story?

For most operators, labour is the largest line on the P&L by some distance. After the last few increases a great many hospitality businesses moved their whole team onto the National Living Wage, managers and events staff included often for the first time, and used tronc to restore the differences between them, so that a head chef's or general manager's seniority now shows up in their tronc points rather than their base rate. It may have seemed like the only response at the time, but it means that every rise in the minimum now lifts the entire payroll rather than just the bottom of it, and the hierarchy that tronc was holding up gets squashed a little flatter each time.

That is where April gets uncomfortable. If base pay rises by 3.9% and the tronc pot doesn't, and with customers counting every pound there is little reason to expect more in tips, then the part of a manager's pay that rewards their experience shrinks, and the gap between them and the newest starter closes once again. You can rebalance the points, but that only moves the same money around, and since October any change to how tips are shared has to be consulted on with the team first. It's a conversation worth starting early and honestly, because the people most likely to feel the squeeze are the ones you can least afford to lose.

Which brings us to the question that we, and Hussein, think matters most this year: which is not so much how you absorb another rise, but how you hold on to the team you already have. Every resignation sets off a chain of costs that rarely appears anywhere in one place, from advertising and trial shifts, to the overtime your remaining staff pick up while the gap is filled, to a key staff member’s lack of productivity whilst they are being brought up to speed. When we added them up for a single departing manager earlier this year, the bill came to more than £27,000. It’s precisely because these costs don’t show up in a single bill, and sometimes only reveal themselves after a bit of digging, that it feels less painful to let them go than to consider forking out for the things most of us associate with a great place to work, whether that's generous benefits, extra holiday or a wellbeing budget. These can be expensive, so they are usually the first ideas dismissed when margins are this thin.

In actual fact, most of the things that people find most meaningful in terms of the quality of their working lives cost very little. A thoughtfully prepared staff meal that everyone actually sits down to eat together, or that their managers ensure they’ve had time to eat. A rota published well in advance and stuck to, a conversation about where someone could be in a year's time and a clear plan of how to get them there, a manager who notices when somebody is struggling and does something about it. All these often do more for loyalty than any perk, and none of them needs a budget line of its own.

Robert Richardson of the Institute of Hospitality put it well in his response to the Budget, warning that when money is tight, decisions about training and development become harder, but that "the people who lead our businesses and deliver exceptional hospitality remain our greatest asset". Or, as he put it more memorably: "There is no point in burning the lifeboat to save the ship." (forgive us a quick sales pitch, but f you want somewhere to start, the Countertalk Academy was built with exactly this in mind, giving your team a structured and affordable way to grow).

Is the VAT fight lost?

It’s tempting to think  so. "We told them repeatedly that VAT is the problem and they have not listened," said Ayesha Kalaji of Queen of Cups in Glastonbury, before asking the question a lot of people were thinking on the day: "Are we screaming into the void?"

We don't believe we are, but we do think it is time to accept that campaigns like this are a marathon rather than a sprint. The movement on rates came after years of sustained pressure, and Allen Simpson was quick to point out that it "shows that forceful, sustained sectoral campaigning works", adding that "we must carry on if we are going to win the VAT cut we so badly need". Hospitality still pays 82p in business taxes for every pound it makes, by UKHospitality's reckoning the highest of any sector in the economy, and that argument is not going away.

What may need to change is the shape of the argument. The economic case for a lower rate is strong, from first jobs for young people to the life of the high street. Westminster knows these arguments. There is another case to be made alongside it, which is that the best restaurants, pubs and cafés are cultural institutions in their own right, every bit as much a part of what makes a place worth living in as its galleries, theatres and arts spaces, and that they deserve protecting on those grounds too. Government already accepts that argument for grassroots music venues, which now share the pubs' rates relief, so it is hardly a leap to extend it to the places where people eat, drink and gather. The more angles we keep hammering this from, the harder it becomes to ignore.

So where should your energy go between now and April?

The most useful thing you can do this month is rebuild your 2027 payroll at £13.21, taking in National Insurance, pensions and holiday pay, and then decide how you will handle all the wages above it before your team starts asking - because it’s likely they will. Telling people now that a pay review is coming, and when, costs nothing. And there’s nothing like a clear answer to generate goodwill, trust and loyalty.

Alongside that, check how the new rates relief applies to your premises, factor the February duty rise into your drinks pricing before Christmas rather than after it, and remember that your customers had a quieter Budget than you did. A £100 energy payment for 20 million households and VAT on home electricity held at zero until July will give some people a little more room in January, but it’s highly unlikely that room will convert to spend on hospitality. If prices must move in April, think about where you can add value, rather than simply adding pounds to the bill.

And keep making noise. Charlotte Heyes of Nell's Pizza called this "a huge missed opportunity to unlock growth in our sector", and the only way the next Budget is different is if the case for hospitality’s crucial value in our society and economy keeps being made, loudly and from every angle, between now and then.

Read the small print with us

A Budget speech is only ever the headline, and working out what it really means for your rota and your prices takes a little longer, which is exactly why we'd love you to join us for our panel, Reading the Small Print: What the Budget Means for Hospitality, on Monday 16 November, from 6pm until 8.30pm, at Coin Laundry on Exmouth Market.

Hussein Ahmad of Viewpoint will be joined by Ravneet Gill of Gina, Marc Summers of Bubala, Nathalie Moukarzel of Sohaila and Fat Macy's and Jess Blackstone of Finks, with Adam Coghlan in the chair, for an honest conversation about where the pressure will really fall next year and what they are already doing about it.

Tickets are £15, including drinks.