Ritika Janiya
Many people in the UK love eating out at restaurants, enjoying a nice meal with friends or family. But lately, going out to eat has become expensive, and diners are starting to feel the strain on their wallets. Now, recent changes in the UK budget, introduced by Labour’s Chancellor Rachel Reeves, are expected to make eating out even pricier. This budget introduces new employer National Insurance Contribution (NIC) rates, along with a rise in the minimum wage. As a result, restaurants and other businesses in the hospitality industry may need to raise their prices further to cover these costs.
According to UK Hospitality, a trade group representing restaurants, hotels, and pubs, these new costs could lead to significant price hikes. They estimate that prices might go up by about 8% for diners, simply to help cover the rising costs of hiring and retaining staff. This could add a hefty amount to the total bill that customers see at the end of their meals.
An Already Struggling Sector
Even before this budget, many restaurants were facing tough choices. The hospitality industry in the UK was hit hard by the COVID-19 pandemic, followed by high inflation rates that have led to rising food and energy prices. Many restaurants, pubs, and cafes have had to decide between raising their prices to cover these costs or taking losses in hopes of retaining their customers. With the added burden of increased employer NICs and wages, businesses now find it even harder to survive without increasing prices.
Tim Martin, the CEO of the popular pub chain JD Wetherspoon, shared his concerns, estimating that these new changes could add an extra £60 million in costs for his chain’s 800 pubs and 50 hotels. This is a significant amount, enough to erase much of the profit that Wetherspoon made last year. Martin and other industry leaders believe that the budget places a lot of pressure on an already weak sector. If prices rise too high, fewer people may choose to dine out, affecting restaurant earnings.
Consumer Choices Are Shifting
One major concern is that consumers are already being more careful about their spending. A report from Barclays found that spending on eating out has stopped growing. Instead, people are choosing to spend on at-home entertainment options like digital subscriptions. In October, while spending on dining out stayed flat, spending on streaming services like Netflix increased by 10%. The winter season, with darker evenings and colder temperatures, usually reduces the number of people going out to eat. Combined with rising costs, this trend could create additional problems for restaurants and pubs.
Some restaurateurs have also noted that diners are more selective about where they eat. People want good food at fair prices and may not return if they feel they aren’t getting value for money. As Hugh Corcoran, a London chef, recently shared, if customers don’t feel hungry or excited about a restaurant’s offerings, they might just choose to stay home.
New Costs Make the Future Uncertain
The recent budget has also increased concerns about the future of the hospitality industry. UK Hospitality, the trade body representing these businesses, sent a letter to Chancellor Rachel Reeves. The letter, signed by over 200 hospitality business leaders, warns that these cost increases could lead to business closures, job losses, and fewer investments in the sector. Many small businesses are already struggling to keep up with expenses, and with even higher costs now looming, some may be forced to close within the next year.
The new budget includes a promise to possibly lower business rates—a tax that many in the hospitality industry think should be revised. However, any reduction in business rates isn’t expected until 2026, which doesn’t provide immediate relief for struggling businesses. While some view the proposed lower business rates as a positive change, others feel that the timeline doesn’t address the immediate needs of the sector.
The Impact on Small Businesses
Smaller businesses, especially independent restaurants and pubs, are particularly vulnerable to these changes. Running a small hospitality business often means working with tight budgets and thin profit margins. Any significant increase in costs, like the rise in employer NICs and minimum wage, puts additional strain on these small establishments.
Stosie Madi, who runs the Parkers Arms in Lancashire, shared her views. She believes that while the Chancellor may have aimed to help essential services like the NHS, the new taxes are coming at a difficult time for small businesses. As a self-described “committed socialist,” Madi still thinks the changes could have been introduced more carefully, especially for businesses that are still recovering from past challenges.
In York, Neil Bentinck, chef and owner of the restaurant Skosh, faces similar challenges. Recently, he introduced an earlier Saturday seating to help increase his restaurant’s profits. Yet, he says that any extra revenue will likely go toward covering the additional costs brought on by the budget. Like many in the industry, Bentinck tries to stay optimistic, noting that his restaurant remains fully booked at £70 per person, showing that people still want to dine out if they feel the experience is worth the money.
A Call for Change
With the current situation, restaurant owners and industry leaders hope that the government will recognize the difficulties that hospitality businesses face and work to create better policies to support them. Many feel that the current approach may be too harsh on an industry that plays an important role in the UK’s economy and culture. By potentially helping with business rates or offering other financial support, the government could help ease some of the burden on these businesses.
