Government support for the hospitality sector

Abbas Panjwani; Annalise Murray; Francesco Masala; Mark Sandford; Matthew Ward

Documents to download

Government support for the hospitality sector (261 KB , PDF)

Download ‘Government support for the hospitality sector’ report (261 KB , PDF)

Background

The hospitality industry primarily refers to the accommodation and food services sector. This means restaurants, cafes, pubs, bars, catering, hotels, campsites and other accommodation.

The economic output of the hospitality sector in the UK was £62.6 billion in 2023. This corresponded to around 2.8% of total UK economic output. Hospitality is similarly important to the economic output of each country and region in the UK; hospitality makes up 2-4% of the total economic output for each UK country and region.

There were 2.6 million jobs in the hospitality industry in the UK in March 2025, representing 7.1% of all UK jobs. The hospitality industry was the sixth largest of the main industries in the UK, in terms of number of jobs.

Recent challenges

According to the Office for National Statistics’ Business Insights and Conditions Survey, the costs of labour and materials were the main challenges impacting hospitality businesses’ turnover in June 2025.

Staffing

In April 2025, the National Minimum Wage increased from £11.44 an hour to £12.21 an hour for employees aged 21 and older. This followed its largest ever increase in April 2024, from £10.42 an hour to £11.44 an hour.

In the Autumn Budget 2024 the Chancellor increased the rate of employer National Insurance Contributions (NICs) from 13.8% to 15.0%.

Inflation

At its peak in October 2022, annual inflation was 9.6%. Inflation on food and non-alcoholic beverages peaked at 19.2% in March 2023. As of May 2025, annual inflation was 3.4%, and inflation on food and non-alcoholic beverages was 4.4%.

Despite inflation coming down compared to 2022 levels, consumers are still cutting back on discretionary spending, which could impact demand for hospitality services.

Government intervention

Business rates

The government will introduce up to two new lower multipliers for retail, hospitality and leisure properties from 2026/27. These multipliers can be set at up to 20p below the standard multiplier. These new multipliers will replace the business rates relief scheme for properties in the retail, hospitality and leisure sector that has operated in England since 2020/21. This scheme provides 40% relief for these properties in 2025/26.

Alcohol duty

In 2023, the government introduced a ‘draught relief‘ with the specific aim of supporting pubs. The ‘draught relief’ reduces alcohol duty by 9.2% on beers and ciders, and by 23% on spirits, wines and other fermented products. This relief is only available to such drinks if they are sold in a pub or other hospitality venue.