UK Hospitality Braces for Job Cuts Over Labour Policies

The National Living Wage rose to £12.71 an hour for workers aged 21 and over on April 1, a 4.1% increase that, stacked on top of a sweeping business rates overhaul, produced immediate pain across the UK's pub and restaurant sector. A survey from UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping, and Hospitality Ulster found 64% of hospitality businesses will cut jobs and 51% will cancel investment plans as a direct result of today's cost increases. Just under half, 42%, say they will also reduce trading hours, and 15% will be forced to close.

The minimum wage increase alone is expected to add around £1.4 billion to the sector's costs, forcing employers to reassess staffing levels, opening hours and investment plans. Workers aged 18 to 20, who fill a disproportionate share of kitchen prep, bar, and hosting shifts, will be paid £10.85 an hour, a rise of 8.5%, while apprentices and those under 18 will be paid £8 an hour, a rise of 6%. Every tier of hospitality's hourly workforce got more expensive simultaneously.

Business rates compounded the shock. From April 1, the expanded retail, hospitality and leisure relief, currently worth 40% off the bill and capped at £110,000 per business, was abolished. Business rates bills are set to rise sharply, with total UK receipts forecast to rise by £3.4 billion to £37.1 billion in 2026/27 as the new revaluation cycle takes effect. The government offered a partial concession: a 15% reduction in business rates bills for pubs, followed by a freeze on those bills in real terms for two further years. The three-year package would be worth £1,650 for the average pub in the financial year 2026-27 and will cost the Treasury £80 million in its first year.

Despite strong lobbying, restaurants, cafés, hotels and bars have not been included in this specific support package, prompting criticism that the policy is too narrowly focused. The four trade bodies responded with a joint statement: "Despite the necessary and welcome support for pubs on business rates, neighbourhood restaurants, local hotels and independent cafes all face their bills rising in the thousands." "Hospitality's tax burden, the highest in the economy, is suffocating the sector. The impact is clear: more lost jobs, less investment and business closures."

The sector entered April already carrying significant weight. Between 2021 and 2024, food and drink input costs rose by more than 30%, energy prices remain around 70% higher than pre-pandemic levels, and wage costs increased by more than 20%. Average operating margins in pubs have fallen from 12 to 15% pre-pandemic to around 4% today. When surveyed before the recent escalation in energy markets, almost all businesses, 93%, said energy costs were already impacting profitability.

The trade bodies called for a VAT reduction for hospitality, permanent business rates reform, and changes to employer National Insurance contributions. "Hospitality businesses are clear that cutting their costs through a lower rate of VAT, business rates reform and changes to employer NICs will deliver new jobs, investment and growth," the joint statement said.

For workers watching next week's schedule go up on the board, the mechanics are blunt: when a restaurant's monthly tax bill rises by thousands and every labor hour costs more across every age band, the first cuts tend to land on part-time shifts, split shifts, and the flexible hours that newer staff depend on most. With summer hiring season just weeks away, the sector's message to government is that time is running short.