Keeping the lights (and ovens on): What Reeves’ Budget will mean for UK Hospitality

The sector is a cornerstone of the UK economy, employing millions and animating high streets, tourism and community life. Yet it is also uniquely exposed to the current cost environment.

As Rachel Reeve’s much anticipated (and feared) 2025 Autumn Statement finally takes place, the question isn’t about growth, but about whether operators can even afford to keep the ovens on.

After surviving COVID-19, the hospitality industry has faced an onslaught of rising costs. Consumer spending pressures are well documented; the more urgent threat is on the supply side: soaring food prices, increased insurance premiums, higher wage bills, and, critically, unprecedented energy costs that continue to erode margins for hospitality operators.

These aren’t optional expenses; diners expect well-lit, warm venues with ovens, fridges, and freezers running all day and night.

Even though wholesale prices have cooled from their peaks, many businesses are still tied into contracts agreed when costs were sky-high, pushing already thin margins to breaking point.

What’s more, many operators have smart meter data, but without meaningful interpretation, it’s like watching a speedometer without understanding the warning lights: venues see the numbers, but are driving blind when making decisions.

Without energy support, many venues could shut their doors this winter when usage peaks. Extending some assistance, even on a temporary basis, would allow businesses the breathing space to plan and adapt rather than panic and cut back.

The sector is not asking for indefinite subsidy, but it does need stability long enough to renegotiate contracts and adapt operations.

Without it, insolvencies will rise, and communities will lose much-loved venues that hold people together.

The Chancellor should bear in mind that VAT policy interacts with hospitality sector costs in similarly potent ways. A return to the reduced rate seen during the pandemic would give operators a vital buffer as they battle rising costs.

Keeping VAT at 20% is a lose-lose: raise prices and risk losing already cautious customers, or swallow the extra costs and slip into a loss. For independents and family-run venues, this calculation is increasingly untenable.

Business rates are another heavy burden. Unlike online retailers, hospitality depends on physical space, yet the system penalises that presence.

Extending or expanding relief would free up funds to invest in upgrades, sustainability, and energy efficiency, helping to avoid further boarded-up shopfronts and fading high streets.

Labour costs add to the pressure. Higher wages are good for workers, but without complementary measures such as National Insurance relief, employers may cut hours or staff. Similarly, alcohol duty, often seen as symbolic when it comes to the Red Box, plays into the cost equation.

Freezing alcohol duty could help narrow the gap between pub and supermarket prices, giving people a reason to spend their evenings out rather than drinking at home.

Hospitality is an economic, social, and cultural infrastructure. Supporting the sector through targeted cost and energy measures is an investment in employment, community, tourism competitiveness and the vibrancy of everyday life.

The choices made now will determine whether the industry emerges stabilised and resilient or diminished and wanting. The question is whether the Chancellor will recognise what is at stake beyond Westminster and give the sector a chance.

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Phineas Page is the CEO and Founder of Cap Energy

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