‘Very few will make it’: Entrepreneurs warn against starting a small business in ‘hostile’ Britain ahead of Rachel Reeves’ crunch Budget

Hospitality trade bodies and businesses are sounding the alarm ahead of the impending Budget, with leaders calling on Rachel Reeves to cut VAT and business rates for pubs and restaurants.

It comes as one entrepreneur admitted to LBC that their success has come “in spite” of government policy.

The Chancellor is looking for ways to fill an estimated £20million black hole ahead of the Autumn announcement on November 26, with Reeves reportedly considering a range of tax hikes.

Earlier this week, LBC revealed that one such option is another 3.6 per cent hike in alcohol duties, with senior figures warning that such a move would “kill the industry”.

The move would also be bad news for small businesses that supply the hospitality sector, including independent drink brands and wholesale retailers, with many entrepreneurs insisting the current Government isn’t doing enough to support an already struggling industry.

Read more: UK pubs paid almost £100k on alcoholic drinks taxes last year as Chancellor urged to freeze duty

Read more: Transport Secretary defends potentially unpopular decisions in Autumn Budget

Imme Ermgassen, the founder of a non-alcoholic aperitif called Botivo, told LBC that the UK is a “hostile” environment for entrepreneurs looking to step into the food and beverage industry.

“I know very few independent brands that are anywhere near to breaking even,” she told LBC.

“Over 90 per cent of businesses aren't making it to year three and we're seeing craft breweries closing every single day, brands closing every single day. There are very few that will be able to make it.”

Independent drinks brands and retailers say the economic pressures hammering pubs, restaurants, and hotels through alcohol duty, high business rates, and VAT create a “secondary squeeze” on their own companies that stifles growth.

Laura Riches, the founder of a luxury boxed wine brand in London called Laylo, has seen this firsthand. “When margins are squeezed for hospitality, they have to pass that on to their suppliers,” she told LBC.

“That prices brands like us out of vendor processes because we simply can't compete. Although we're not the sort of immediate first line that these changes impact, we are feeling that secondary squeeze.”

Robert Weatherhead, an independent wine retailer in Bolton, explained that he regrets starting a business so closely aligned with the hospitality industry.

A digital consultant who began his wine business as a side hustle shortly after COVID, Mr Weatherhead told LBC he is being forced to close the company in part because of the financial pressures faced by pubs and bars.

Explaining that raising taxes across the drinks and hospitality sector will have knock-on impacts on suppliers like him, Mr Weatherhead said: “Being that close to [the hospitality industry] as an outsider just emphasised to me how much it’s suffering.“

“There’s not enough money in it anymore,” he added.

The small business owners we spoke to all insisted that reductions in VAT for pubs and restaurants should now be a priority for Rachel Reeves, with the future of many businesses hanging in the balance.

“Increasing the VAT relief on hospitality would be a huge boost and would benefit us as suppliers. It would create more job security for the workforce and get consumers spending again,” Ms Riches said.

While Ms Riches and Ms Ermgassen are both examples of successful UK entrepreneurs, Ms Riches says it is “in spite of” the government.

“In spite of these headwinds, we are continuing to grow. Our business has huge momentum. But it seems success is achieved despite the government, not because of it.

“I find it very frustrating that the Labour government keeps talking about growth when the incentives for me as an entrepreneur seem to get less and less clear.”

There were 5.6 million small businesses in the UK at the start of 2025. That’s up by 200,000 from the previous year, according to figures provided by the Department of Business and Trade.

However, Small Business Britain CEO Michelle Ovens told LBC it’s “bonkers” to suggest the UK is unfriendly to small businesses.

“If it really was a terrible place to start a business, we'd be declining in the number of businesses, not growing,” she insisted.

“If you look over the last five years, hospitality has been hit by quite a lot. Energy prices rose with the war in Ukraine; inflation increased input costs, particularly for oil and imports from Europe; interest rates and wages went up too. A lot of those things have started to ease off now.”

“I think it's harder if you're an older business because you've been through a real roller coaster the last decade,” she added. “Sometimes it feels like you're constantly pivoting.”

“Newer businesses started with this as the norm, so they're less impacted. If you've gone through COVID and then the energy crisis and then the inflation and cost of living crisis, of course people are coming out of it tired and thinking this is hard work. But I do think there's a lot of indicators that things are getting better, that consumer spend is up, and that people are starting more businesses.”

LBC has contacted the Treasury for comment.