Autumn Budget 2024: Hospitality & Leisure Predictions & Wish List

The UK has one of the highest rates of VAT on Hospitality & Leisure services in Europe and the 20% rate is having a double whammy effect on businesses, by 1) cutting the sectors margins too thin and 2) reducing demand in times of high inflation, as increased costs need to be passed on and consumers disposable income does not keep pace.

Reducing the VAT rate would allow the sector to cut prices while maintaining margins, encouraging more consumers to eat or drink out and acting as a boost to the economy.

The Labour government included a promise to make Britain a “clean energy superpower” in their manifesto.
The Hospitality & Leisure industry accounts for around 10% of the UK’s overall energy consumption and creates carbon emissions of around 8 million tonnes per year.

The labour government have an opportunity to provide tax incentives for those businesses on renewable and clean energy tariffs, to reduce the sectors energy bills and help deliver on net zero targets.

The industry continues to be under-resourced and increases to National Living Wage have put further pressure on H&L businesses. We expect that there will be a further increase to NLW announced for 1 April 2025, but we would like to see either a reduction in employer’s NI rates, an increase to the Employers Allowance or greater incentives and targets on apprenticeships for the sector, which should aim to develop perceptions of the industry as somewhere to build a career. This would reduce immediate costs borne by operators while generating a pipeline of talent to future proof the wider sector.

The government has also suggested they are reviewing our relationship with Europe. If working visa rules are updated, some of the existing resourcing pressure on H&L businesses could be eased.

The sector continues to absorb a disproportionate share of the UK’s business rates liability and saw the standard multiplier increase by 6.7% in April 2024.

The expectation is that this could rise further from April 2025 in light of the “pain” the Government have alluded to, but we would like to see at a minimum a freeze on the multiplier while consultation can take place on major business rates reform, to more fairly distribute the tax burden.

Labour are set to announce their “Business Tax Roadmap” and given their manifesto pledge was to not increase the main rate of corporation tax (currently tax 25%), we would hope the rate does not increase and that the lower profits rate (currently at 19%) also remains the same, or a wishful reduction! Their manifesto also stated that the full expensing capital allowance relief (100% tax deduction on the full cost of qualifying assets) would also remain, which is a useful relief for companies looking to invest heavily in their capital assets.

In summary, the H&L sector has continued to prove resilient in the face of strong headwinds since coming out of Covid lockdowns, but further intervention is required to support businesses with spiralling energy, staffing & rates costs.

While the Government have signalled the Autumn budget will seek to cut the deficit so increase the tax take, we’re calling for a more optimistic, growth focussed and future proof approach, to support the businesses at the heart of communities across the UK.