It beggars belief that the government did not think about the consequences of its policies when it introduced them
- Kate Nicholls, Chair of UKHospitality
SAs of tomorrow, April 1st, the rules change. If only this was an April Fool: for thousands of restaurants, cafés, bars and hotels across the UK, years of pandemic-era business rates relief will end, not with a negotiated exit, but with a cliff edge. The industry has been watching the date approach for months, bracing for impact. Now it is here, and for many, the numbers are simply crippling. The industry has modelled the numbers. Can the government possibly have done the same?
On paper, the government's reform sounds reasonable. The 40% relief many hospitality businesses have relied on disappears, replaced by a new system of permanently lower multipliers — a reduced tax rate presented as a long-term benefit for the sector. But the value on which that tax is calculated has been reset at the same time, and in many cases, it has risen sharply. The new rateable values are based on April 2024, when the property market had largely recovered from the pandemic. Rents had bounced back, demand for prime locations had returned. The property market looked healthy. The hospitality industry in 2026, however, is anything but.
The outcome for many businesses is clear: they will pay more. Significantly more. Kate Nicholls, Chair of UKHospitality, has said the plan is "quickly unravelling, and will deliver the exact opposite" of what the government promised, warning that "pubs will see bills increase by thousands and hotels by tens of thousands."
Costs stacking on costs
Business rates do not arrive in isolation. They land on top of a cost base that has been rising for two years — and in the case of energy and food, the timing could hardly be worse.
The conflict in Iran has added a layer of cost shock that was not in any operator's budget at the start of the year - and even before this unexpected development, the numbers already looked bad. Since the start of the invasion wholesale natural gas rose roughly 75% between late February and 23 March alone. UK commercial energy costs are currently running around 60% above recent norms. Food supply chains that depend on fertiliser — which depends on gas — are also under pressure, with IGD warning food inflation could reach over 8% by June if the conflict persists. For a restaurant where food and energy together typically account for 35% of revenue, these are not small movements.
Meanwhile, the National Living Wage rises from £12.21 to £12.71 per hour from today, with the rate for workers aged 18 to 20 rising by 8.5% to £10.85. Employer National Insurance contributions, introduced in April 2025, effectively added £2,500 to the cost of employing each full-time member of staff. UKHospitality estimates that wage increases alone will cost the sector an additional £1.4 billion across the industry.
The cumulative effect is not marginal. It is transformative. For many mid-sized restaurants and bars, the combination of these cost increases is adding well over £100,000 to annual overheads — in most cases far more than the total profit the business was generating before.
The Numbers
It is worth being clear about what these numbers mean in practice. A business operating at a loss is not simply making less money — it is burning through reserves (if it has any), or borrowing against a future that is getting harder to see. Tom Kerridge has spoken publicly about one of his pubs facing a jump in rates from £50,000 to £125,000. "All of a sudden," he said, "you are losing money." That is not a marginal change. That is a structural shift in the economics of the business, and Kerridge's modelling will be familiar to any hospitality business owner who has modelled their numbers.
UKHospitality's own projections are stark: restaurants are set to lose 963 sites in 2026, bars 540, and hotels 574. That is more than six venues closing every single day. Read that again: six venues, every day, for a year. And we can imagine what next year will bring, if nothing changes. Michael Kill has described some of the projected increases as "closure-level numbers", and the modelling makes clear why. Insolvency data bears this out: 3,353 accommodation and food and drink businesses entered insolvency proceedings in the year to December 2025, and the pressure is not relenting — it is arriving harder and faster than ever before, and there's nothing to cushion the impact.
Pubs get help. The rest do not.
In January, following sustained industry backlash particularly from high-profile industry voices such as Gordon Ramsay, the government announced a 15% relief for pubs and live music venues for 2026/27, with bills frozen in real terms for the following two years. It was a notable concession — and a tacit acknowledgement that the original plan had gone too far, at least for one part of the sector. But restaurants, cafés and hotels were left out. Kate Nicholls welcomed the pub announcement but said: "The reality remains that we still have restaurants and hotels facing severe challenges from successive Budgets. They need to see substantive solutions that genuinely reduce their costs." No solution has yet been forthcoming.
Why were pubs singles out? The answer lies less in economics than in politics. Pubs occupy a unique position in the national imagination. They are framed as community assets, cultural touchpoints, and symbols of British life. When they are under threat, the narrative resonates, and that makes strategic sense in politics. Live music venues benefit from a similar framing, tied to the UK's cultural infrastructure and longstanding concerns about decline. They are visible, definable, and defensible.
The government has decided that restaurants, cafés and bars are none of those things — at least not in the same way. They are more diverse, harder to categorise, and less easily presented as a single, unified cause. But they are no less exposed. They face the same increases in rateable value, the same loss of relief, the same rising labour and input costs, and in many cases, their margins are even tighter. Their ability to absorb shocks is more limited. And yet, they have been left to navigate the full impact of the changes without equivalent support.
On the ground, the distinction feels arbitrary. As one operator put it: "We're all dealing with the same numbers. Only some of us are getting help with them." That creates a two-speed sector, where some businesses are cushioned and others are fully exposed, despite operating under broadly similar conditions.
What this means for customers
None of this happens in a vacuum. Menu prices have already been rising faster than CPI — up 3.5% in chain restaurants and 4.2% in pubs and bars in 2025 alone. With costs now rising again and hitting from many directions the options for operators are limited: raise prices further, reduce hours or headcount, reduce or tone down their offering, or close. All these choices have significant cultural, economic and societal impact for the communities which these businesses serve.
The trap is a cruel one. Industry data suggests that once menu prices rise in the 10–15% range, restaurants start to see declines in traffic, not growth. Raising prices to survive risks undermining the footfall needed to stay viable. For businesses already running at negative margins, there is no clean exit from that logic.
Kate Nicholls has been direct about the consumer dimension: the sustained cost pressure on businesses is "impacting business viability, jobs and consumer prices." What happens to hospitality does not stay in hospitality. It shows up in fewer local options, higher bills when you go out and, in too many cases, boarded-up windows that used to glow with welcome.
The system's fundamental flaw
At the heart of this is a deeper misalignment between how the system measures value and how hospitality actually works. Business rates are based on property — on what a site could theoretically command in rent. But hospitality is not a property game. It is a margin business, built on people, product and consistency, operating within punishingly tight financial constraints. This attitude is woefully short-sighted, for what is more detrimental to property prices than a boarded-up high street?
John Webber, head of business rates at Colliers, has said "it beggars belief that the government did not think about the consequences of its policies when it introduced them," arguing that a proper impact study should have been carried out before the multiplier levels were set. The system assumes that if a property is valuable, the business within it must be thriving. Increasingly — and the modelling above shows exactly why — that assumption does not hold.
Tomorrow is not just a policy milestone. It is the moment the bill comes due — for individual businesses, for the sector as a whole, and for the assumptions built into a system that has failed to keep pace with reality. Hospitality will adapt — it always does. But adaptation has a cost, and that cost is already being paid in closed kitchens, shortened hours, and livelihoods lost. The question is not whether the government knew this was coming. It did. The question is why it chose to let it happen anyway.
