Nicholls warns Labour tax rises could cripple Britain’s restaurants

Britain’s restaurant operators are heading into April with a higher wage floor, heavier payroll bills and a fresh warning from Kate Nicholls that Labour’s tax rises could be the final nail in the coffin for many venues. From 1 April 2026, all National Minimum Wage rates rise again, and the adult National Living Wage goes to £12.71 an hour from £12.21. UKHospitality says the Budget changes have already left the sector facing an extra £3.4 billion in annual tax costs from higher employer National Insurance Contributions and wages.

That burden lands on a trade that is overwhelmingly small-scale. The House of Commons Library counted 176,685 hospitality businesses in the UK in March 2025, and 99.6% were SMEs, with 97.7% classed as small businesses. That means the pain is likely to hit independents and small groups first, especially the labour-heavy restaurants that rely on tight rotas, tipped staff and every turn of the table to keep margins alive. For operators already juggling staffing shortages and burnout, even a modest rise in hourly pay can force cuts in shifts, hiring freezes or menu price increases.

The government has pointed to some relief. The Autumn Budget on 30 October 2024 extended the retail, hospitality and leisure business rates relief scheme through 2025/26, worth more than £1.5 billion, and said permanently lower business rates multipliers for retail, hospitality and leisure properties in England would begin from 2026-27. But the sector says that does not cancel out the immediate hit from payroll taxes and wage growth. Nicholls has repeatedly warned that the surge in employment costs would choke investment, and hospitality groups say the numbers are already showing up in lost jobs.

UKHospitality says more than 10,900 hospitality jobs were lost in one month, taking losses since the 2024 Budget to 84,000. The group also estimates that hospitality accounted for 55% of all job losses in the country since last year’s Budget. For restaurant workers, that translates into fewer shifts, thinner staffing and more pressure on the remaining team to cover the floor, the pass and the bar.

The closures point in the same direction. UKHospitality said the sector saw an average of two licensed venue closures a day in the first half of 2025, and later industry data showed 382 net hospitality closures in the final three months of 2025, with restaurants and casual dining among the hardest hit. Office for National Statistics figures also showed accommodation and food service vacancies fell by 5,000 in July to September 2025, while total UK vacancies were down 13.8% year on year. The labour market may be cooling, but for Britain’s restaurants the next squeeze is still coming through payroll.