So… what has the budget actually done for hospitality?

If you run a bar, restaurant, food hall, hotel or venue, you do not care about sound bites.

You care about one thing.

Is there more money in the till or less?

This Budget was sold as the one that finally “backs British business”.

From a hospitality point of view, it has not.

Yes, we finally get permanently lower business rates for retail, hospitality and leisure from 2026. That is the structural fix the sector has been asking for for more than a decade.

But it sits on top of a cost stack that is already up by billions a year from wage rises, national insurance hikes and the drop from seventy five percent rates relief to forty percent for many sites.

So the reality is simple.

The Budget gives with one hand, takes more with the other, and leaves the average operator with almost nothing in the short term.

Here is what that actually looks like.

1. People cost

From April 2026 the statutory rates move again.

• Age 21 and over goes from £12.21 to £12.71 an hour
• Age 18 to 20 goes from £10.00 to £10.85 an hour
• Age 16 to 17 and apprentices go from £7.55 to £8.00 an hour

That is roughly 4.1 percent up on the main rate, 8.5 percent up for 18 to 20 year olds, and 6 percent up for the youngest band.

Hospitality employs a very high share of younger and part time workers, so the steepest increases land exactly in our wage mix.

UKHospitality is already calling out another big jump in total wage cost on top of the last round of rises.

This comes on top of earlier changes this year that added roughly:

• £1.9 billion to payroll across the sector
• About £1 billion in extra employer national insurance as the rate moved from 13.8 percent to 15 percent and the threshold fell from £9,100 to £5,000
• About £500 million more in business rates as relief fell from seventy five percent to forty percent for many sites

That is where the £3.4 billion extra annual burden comes from.

For a typical independent with around 20 staff on mixed contracts, you are easily into a mid five figure increase in annual wage and employer national insurance compared with pre 2024.

For a lot of single-site businesses, that wipes out the profit line.

2. Tax on work and on owners

The Budget freezes income tax and national insurance thresholds out to 2030 to 2031.

If your pay rises to keep up with inflation, more of it drifts into higher bands.  

Staff pay more tax even if they do not feel any better off. You pay more tax on your own salary for the same reason.

On top of that, tax on dividends, property income and savings goes up by 2 percentage points from next April.

So you get hit three times.

• Teams feel squeezed because frozen thresholds eat more of their pay
• Owners feel squeezed because dividends and property income take a higher slice
• The business is already carrying higher wage and national insurance with more to come

Try holding a head chef or a general manager in that environment.

3. Property and business rates

Here is the one structural positive.

From April 2026 we get permanently lower business rates multipliers for retail, hospitality and leisure, covering around 750 thousand properties and taking those rates to their lowest level since 1991. There is also a £4.3 billion support pot to soften the 2026 revaluation. 

BUT on the flip side.

• That reform is paid for by pushing more of the burden onto very high value assets and large sheds
• The current forty percent relief is still temporary, and many sites have already dropped from seventy five percent to that forty percent level

So the journey for a lot of operators looks like this.

Years 1 and 2. Relief drops, wage and national insurance jump, rateable values move up, and the rates bill rises.

From 2026 onward. The lower multiplier kicks in and you may end up better off than under the old system, but only if you have survived the first part.

For mid band restaurants, pubs and bars this should be fairer in the long run. 

For big players and some hotels, the hit will be heavier.

4. Tourist tax

Mayors in England will be able to introduce an overnight visitor levy on hotels, serviced apartments, Airbnbs, and other paid accommodation.

Government language calls it “modest.” The live examples talk about around 5 percent on the room.

Once you add that to a twenty percent VAT rate, and then apply VAT on the levy itself, the effective tax rate on the room heads towards twenty seven percent in those cities.

England already has a higher VAT rate on hospitality than key competitors. Ireland sits at 9 percent, Germany at 7 percent.

So while you will hear big talk about funding transport and local growth, the operator reality is simple. One more slice between the rate on the board and the cash that hits your P and L.

Every extra pound of tax on the room makes bar, restaurant and rooftop investment harder to justify.

Never mind what the tourist thinks? Will they really visit with extra tax?

Short term gain, long-term pain.

5. Product and input taxes

Alcohol duty
Recent changes cut duty a touch on draught beer and cider under 8.5 percent ABV and raised it on most packaged and higher strength products.

The “penny off a pint” line works well in speeches. In a real venue that sells a mix of draught, packaged, wine and spirits, the basket cost is still up.

Sugar levy
From 2028 the soft drinks levy extends to pre packed milkshakes and lattes, with a lower sugar threshold.

If you make drinks fresh on site, you are fine. If you lean on bottled or canned products, or brand partners, cost per case creeps up and you decide if that lives in margin or on the guest bill.

Fuel and energy
Fuel duty stays frozen and the 5 pence cut on petrol and diesel runs through to late 2026. Residential energy bills fall by around £150 a year on average as some levies come off.

Households get a bit of breathing space, which might help spend on going out.

Commercial energy support does not change. Your energy line is still yours to fix.

6. The demand side

The wider picture is not on your side.

Growth is weak. Inflation is still above target. Interest rates are higher than people got used to before covid. Unemployment is nudging up, not down.

Add the threshold freeze and you get the reality for your customer.

• Wages inch up but inflation still eats real pay
• More of that pay falls into tax bands that have not moved
• Mortgage or rent is not suddenly cheap
• The fastest way to claw back cash is to cut visits, cut rounds and cut spend per head

Sector surveys already show a big chunk of guests planning to go out less often or spend less when they do.

So you are carrying higher cost per hour, higher tax on work and higher tax on property, in a market where guests are more price sensitive and more flaky.

7. What this looks like on a the ground 

Take a single site on £500,000 annual turnover. 

Neighbourhood pub, good casual restaurant, strong wet led bar.

Typical shape.

• Payroll around 30 to 35 percent including national insurance and holiday pay
• Business rates somewhere in the mid five figures once relief falls away
• Energy, food, drink, rent and repairs all pulling from the same pot
• Pre this cost wave, a solid 8 percent net margin, so about £40,000 a year

Now layer on the changes that have hit and are locked in.

• Two rounds of National Living Wage increases, with the main rate heading to £12.71
• Employer national insurance up from 13.8 percent to 15 percent, catching more part time hours as the threshold drops
• Rates relief sliding from seventy five percent to forty percent
• Higher alcohol duty and supplier price uplifts

You are very quickly looking at an extra annual cost base in the high tens of thousands before a single extra pound of revenue.

That drags an 8 percent margin down towards zero unless you move price, mix, service model or hours.

8. What actually helps in this Budget

There are real positives.

• Permanently lower business rates for retail, hospitality and leisure from 2026
• A move to push more property tax onto large high value assets and online logistics
• A clear admission that high street and hospitality sites have been over taxed for years compared with digital models

There are smaller wins.

• Frozen fuel duty for fleets and rural sites
• A bit more headroom in household bills that might support going out
• Promised public investment that could lift confidence if it lands in real projects and not just press releases

Good. Bank that.

But none of this fixes the next 12 to 24 months on its own.

Nobody is coming to bail the sector out.

So the only real question now is this.

What do we actually do.

9. Where innovation has to come from now

If the state is not going to save us, innovation has to come from inside the sites.

Not from fluff. From operator maths.

Here is where I think we have to get serious.

1. Shift from cost cutting to time design
   Stop talking only about wage percentages. Start timing everything. Seconds per order. Steps per drink. Minutes from door to first spend. Design labour around that, not gut feel.
2. Turn every menu into a cashflow plan
   Rank dishes and drinks by contribution, prep time and speed of sale. Strip out slow low margin items. Anchor high contribution lines on every section. Give guests confident choices, not crowded pages.
3. Use space properly
   Map where revenue actually happens in your building. Seats, standing, vertical surfaces, sightlines, bars. Then rebuild layouts so your highest earning metres work hardest and dead zones are removed or repurposed.
4. Build service rhythms, not just rotas
   Design your week around repeatable service blocks. Clear briefs, tight handovers, planned resets. Rotas that match real demand, not the same pattern you used last year.
5. Make tech prove itself in seconds
   Any system that claims to help should prove its value in seconds saved per order, per check, per shift. If it does not save real time or prevent real waste, it is noise.
6. Get closer to your guests than the delivery apps do
   Own your data. Name, visit pattern, average spend, preferences. Treat this as a core asset. Use it to drive frequency and spend per head rather than throwing out blanket discounts.
7. Create one new revenue line per site
   A tasting night. A set menu that genuinely works for the kitchen. A pre order package for match days. Replace “we are busy enough” with “what else can this site earn”.
8. Train for speed and judgement, not scripts
   Invest in coaching your teams to spot cues. When to upsell. When to move the queue. When to settle someone in for another round. That is where wage cost turns into sales, not in posters in the staff room.
9. Redesign how you buy
   Use your data and your front line feedback to simplify the supply base. Fewer lines, better terms, less waste. Volume through fewer SKUs beats a bloated back bar and walk in every time.
10. Plan property like an investor, not just a tenant
    Before you sign the next lease, ask three questions. How many steps per order. How many friction points per guest. How many full cycles per hour at peak. If the answers are weak, do not sign.

This is what innovation looks like on the ground in hospitality.

A new way of thinking about time, space, people and guest journeys under pressure.

10. Where Digby + Fox fits

This is exactly the work I do at Digby + Fox Hospitality.

I help founders and leadership teams:

• Map the true cost and value of every minute, metre and menu line
• Redesign sites so layouts, labour and guest flow actually protect margin
• Turn scattered tech and data into simple operator playbooks teams can run
• Build plans that make sense for the next 12 to 24 months, not just a pitch deck

The Budget has made one thing clear.

If hospitality is going to survive this period and grow, it will be because operators get sharper, faster and more deliberate, not because the Treasury decided to carry the load for us.

If you want to stress test what this Budget really means for your sites and find the profit you cannot see yet, drop me a line.

We can map it on one page, then build the moves that actually work in your building, with your team, for your guests.

Nobody is coming to save us.

It is on us now.