I will call Liz Jarvis to move the motion and then call the Minister to respond. As is the convention for 30-minute debates, there will not be an opportunity for the Member in charge to wind up. I call Liz Jarvis to move the motion.
That this House has considered Government support for the hospitality sector in Eastleigh.
It is a pleasure to serve under your chairship, Dame Siobhain. I am grateful to have the opportunity today to discuss the urgent challenges facing the hospitality sector in my constituency of Eastleigh and across the UK.
Hospitality is not only a significant economic driver, but the beating heart of our high streets and communities. From the pubs that act as social hubs to the restaurants and cafés that bring people together, the sector is central to our economy and way of life. My constituent, Lorraine, is the landlady of the Master Builder in West End in my constituency. Her heating costs are around £3,000 a week, placing an unsustainable strain on her business. Although December bookings provide some hope, she worries that the quieter months of January and February could push her pub to the brink. Despite the pressures, Lorraine’s commitment to her community is unwavering. Her pub hosts local care home residents for darts and meals and welcomes charities, including Southampton Sight, for Christmas dinners and Sunday carveries. As she says,
“it’s not just for coming in on a weekend and letting off some steam, it’s about friendship, kindness and community.”
Yet with rising costs Lorraine is questioning how much longer she can keep her doors open while working over 90 hours a week to make her business work.
In Eastleigh the hospitality industry contributes £114 million annually. It employs 1,805 people and encompasses 84 venues, including some fantastic cafés such as the Coffee Cabin, which recently celebrated its third birthday, many superb restaurants and 32 local pubs. Eastleigh is also home to Steam Town Brew Co., an independent brewery, and The Steel Tank Alehouse, an independent micropub in Chandler’s Ford, both of which embody the entrepreneurial spirit that drives our local hospitality sector. Our football club and world-class cricket ground attract visitors from across the UK and beyond, many of whom stay in our local hotels and enjoy local hospitality.
I commend the hon. Lady on securing this debate. I spoke to her beforehand and we share a similar concern in relation to national insurance contributions. The pressure on hospitality businesses is leaving the industry at breaking point. If the Government and the Minister do not provide some form of relief, we will face a lot of empty cafés and restaurants in the coming year. Does the hon. Lady share my concerns?
Yes, I do share the hon. Gentleman’s concerns. Despite the remarkable community contribution that our hospitality generates, the sector is under immense pressure. Nationally, hospitality employs 3.5 million people. It generates £140 billion in economic activity and pays £54 billion in taxation. The Government’s Budget, however, introduced £3.4 billion of cost increases, including rises in employer national insurance contributions. Those measures disproportionately impact lower-paid and part-time workers, who form the backbone of the industry. The Office for Budget Responsibility has said that next year 60% of the employer national insurance contribution’s increase will be paid for by staff in reduced real wages.
According to UKHospitality, employer national insurance contributions for a part-time worker on 15 hours will increase by 73%. Combined with reductions in business rates relief from 75% to 40%, these policies are creating unsustainable pressures on businesses already operating on razor-thin margins.
The Steam Town Brew Co. is a local success story. David from Steam Town raised the issues of residual inflation in food and drink, the prices of raw ingredients for brewing and high interest rates. He wants to grow the business, but the current economic conditions and existing market restrictions, such as the lack of access to tied pubs for smaller breweries, have made it challenging. The situation is made worse by the surging costs of energy. Hospitality businesses are among the most energy-intensive sectors, with pubs and restaurants relying heavily on refrigeration, heating and cooking equipment. High energy costs have led to dramatic increases in operating expenses that are becoming too hard to bear.
For smaller businesses the increases are not sustainable and many businesses are at risk of closure. Will the Minister share the steps the Government are taking to help hospitality businesses to manage their energy costs in the coming months? Post-covid recovery remains a significant challenge for hospitality businesses. Many are grappling with debt, reduced footfall and the shift of consumers to online food shopping. Last year alone, 2,704 hospitality businesses went into insolvency, highlighting the fragility of the sector and the urgency for Government support.
I thank my hon. Friend for bringing forward this debate. The high streets in both Harrogate and Knaresborough are struggling. Does she agree that the Government need to do more to reform business rates properly? That is the key that underpins the vibrancy of our local high streets. Reforming business rates would give an injection of cash and the ability to do what they do best.
My hon. Friend makes an excellent point and I will say more on that shortly. When the previous Conservative Government presided over an historic drop in living standards—the first time British households ended a Parliament worse off than when it began—it is no wonder that the hospitality sector has struggled in recent years. A sector thrives when people have confidence in their financial futures. That confidence has been eroded by years of poor economic management. High streets should be centres of activity, creativity and connection. The Government’s current policies risk turning them into boarded-up remnants of what once was. Hon. Members know that all too well, as we witness the slow erosion of our high streets with each closed pub, restaurant or café.
What reassurances can the Minister provide that the Government are committed to preventing further closures and fostering growth in our high streets? This weekend sees Small Business Saturday, an opportunity to celebrate and support our small businesses. Instead of stifling those businesses with increased taxes, the Government should lift burdens to allow the hospitality sector to thrive. A strong hospitality sector brings busy pubs, bustling hotels, vibrant nightlife and a renewed sense of community spirit. That is what our towns and cities need to recover from years of economic stagnation.
The Government should create economic conditions so that entrepreneurs are clamouring to open new restaurants, cafés, bars and pubs, finally putting a stop to the steady erosion of the sector in our communities. Every closed hospitality venue is not just a lost business but a lost opportunity for social connection and local employment. The Government must step up and deliver policies that support hospitality and ensure a brighter future for our high streets and the communities they serve.
I would like to know the specific steps the Government are taking to support this vital sector and restore hope to our high streets. If we want to see thriving high streets filled with energy and purpose, the Government must act decisively. At the heart of these challenges lies a deeply flawed business rate system. Business rates actively harm productivity by taxing structures and equipment instead of profits or land value. That outdated system discourages investment, stifling innovation and growth. Liberal Democrats have long called for its replacement with a commercial landowner levy, which would tax only the land value of commercial sites. That reform would encourage investment in buildings and infrastructure, reduce taxes in 92% of local authorities, particularly in deprived areas, and shift the administrative burden from businesses to landlords.
Apologies for being late. I ask the Minister if the Government have considered the impact on the hospitality industry in Scotland from the national insurance changes? The reason I ask is that we do not have business rates relief in Scotland, and I believe the impact of the changes is going to be massively bad for the hospitality industry.
I thank the Member for his intervention and I am sure that the Minister will take it up in his contribution. However, at the moment the Member in charge has the floor.
The hospitality sector is about not just numbers, but people, culture and community. In Eastleigh, hospitality businesses provide jobs for students, opportunities for young people entering the workforce, and spaces where people come together. They are integral to our social fabric and our economy. They deserve meaningful support from this Government.
Without decisive action we risk losing not only businesses, but the vibrant communities they sustain. I urge the Government to reform business rates to support productive investment, reverse the increase to employer national insurance contributions and provide targeted relief to the hospitality sector. Let us not allow short-term measures to undermine the long-term health of our economy and communities. In the spirit of hospitality, I conclude by inviting the Minister to visit Eastleigh to meet representatives from the hospitality industry and enjoy the very best that the constituency has to offer.
I appreciate the opportunity to serve under your chairmanship, Dame Siobhain, and in the usual way I congratulate the hon. Member for Eastleigh (Liz Jarvis) on securing this important debate. I thank her for her invitation to visit Eastleigh; I do not know specifically when I will have the opportunity to do so, but I will certainly consider it when I am in the Southampton area. Her constituency sounds like a particularly attractive part of the UK—if she will forgive me for saying so, almost as attractive as Harrow West, where we also have some great hospitality businesses.
The hon. Member rightly alluded to the significance of Small Business Saturday this week, which provides a great opportunity to celebrate the small hospitality businesses that bring such joy and life to the communities of all our constituencies. I will say more about Small Business Saturday in due course.
This debate matters because the hospitality sector is hugely important to the UK economy, employing around 3.5 million people and generating around £140 billion of economic activity. It contributes around £54 billion in revenue per annum. The sector is important to local economies because it helps to create vibrant places that people want to visit, work in and live around. It is important in supporting wider social objectives, providing accessible jobs, community cohesion and welcoming spaces for people to enjoy. The hon. Member referenced the work of the landlady, Lorraine, as just one example of the difference that hospitality makes in so many of our communities. In short, hospitality is the backbone of our high streets and the lifeblood of many of our communities.
I meet regularly with hospitality businesses, and only yesterday hosted a meeting of the Hospitality Sector Council, so I hear first-hand the pressures facing hospitality businesses. A hospitality business, like any other business, can only prosper and grow on the firm foundation of economic stability. Unfortunately, economic stability is certainly not what we inherited when we came into power in July. At the end of October, at the Budget, the Chancellor made decisions that she did not want to have to make, but however painful those decisions may have been in the short term, they were the right decisions and were necessary to fix the foundations of what most in the House recognise was a broken economy.
11:25 am
Sitting suspended.
The cost of living crisis has created a perfect storm for the hospitality sector, as households across the UK tighten their belts, reducing discretionary spending on dining out, hotel stays and social experiences. That squeeze on disposable income directly impacts the vibrancy of our high streets. Individual prosperity and high street prosperity are intrinsically linked. When families feel they cannot afford to participate in social activities, it is not just their individual wellbeing, but the fabric of our communities that suffers.
For high streets such as those in Eastleigh, that could provide a much-needed lifeline. It would allow businesses to focus on growth and innovation, while alleviating the crisis faced by small enterprises and hospitality venues. Although the Government have announced plans to introduce lower business rates for retail, hospitality and leisure properties from 2026-27, those changes are far too delayed. By the time those reforms take effect, many businesses will already have shut their doors. Moreover, reducing relief for small businesses from 75% to 40% is a devastating blow to thousands of enterprises trying to recover from years of economic strain.
In particular, pubs are bearing an unjust share of the burden. According to the British Beer and Pub Association, despite accounting for just 0.5% of total business turnover, they pay 2.8% of the business rates bill, an overpayment of around £500 million each year. I ask the Minister what plans the Government have to review that inequity.
The Budget also reflected the need to protect smaller businesses—for example, by more than doubling the national insurance contribution employment allowance from £5,000 to £10,500. It will provide relief for about 1 million small businesses. It also set out the steps that we will take to address the iniquities of an antiquated system of business rates that is particularly unfair for retail, hospitality and leisure businesses. The hon. Member for Eastleigh rightly referred to that in her contribution. Not only is the current system of business rates unfair, but it disincentivises investment, creates uncertainty and places an undue burden on our high streets.
The Budget delivers on our manifesto commitment to make hospitality pay a fairer share of business rates, with a permanently lower multiplier from 2026. Until then, we have extended the retail, hospitality and leisure relief at 40%. In addition, the business rates multiplier will be frozen at 49.9p for small businesses, and we intend to introduce permanently lower multipliers for retail, hospitality and leisure properties from 2026-27. The hon. Member for Eastleigh will also be aware that my right hon. Friend the Chancellor published a discussion paper on business rates reform in order to create a wider debate with the business community about business rates and possible additional ways to reform the system. The proposed business rates reform has been supported by UKHospitality, and the Treasury widely consulted the sector before making those proposals.
Securing access to finance can be a big issue for many businesses, including those in hospitality, and to that end, the Government have provided more than £1 billion in 2024-25 and 2025-26 for the British Business Bank, aiming to improve access to finance for small businesses, including more than £250 million each year for small business loans programmes.
The British Business Bank also supports community development finance institutions—community banks. Recently, I was lucky enough to visit Dhillon’s Brewery Spire Bar in Coventry. After the owner initially struggled to access mainstream sources of finance, he approached the Coventry and Warwickshire Reinvestment Trust, a community development finance institution, which stepped up and provided the funds needed for the brewery and bar to survive and prosper. That is just one example of the way in which we are taking action to improve access to finance, helping to grow the economy so that we can deliver a fairer, more prosperous and healthier society, and help the hospitality sector, in particular, to grow. Growth is the Government’s No. 1 mission, and our new industrial strategy and small business strategy are both central to that.
The small business strategy Command Paper, which the Chancellor announced we will publish next year, will set out our plan to boost scale-ups, grow the co-operative economy, create thriving high streets, make it easier to access finance, help break into overseas and domestic markets, build business capabilities and provide a stronger business environment.
The hon. Member for Eastleigh mentioned the need to do more to support high streets, and I am sure she will be delighted to know about the high street rental auctions policy, which colleagues in the Ministry of Housing, Communities and Local Government have brought into effect. It allows local councils to require landlords to open up high street facilities that have been closed down so that hospitality or other businesses can take advantage of those spaces and bring renewed life to our high streets. In the coming months, we will be setting out further measures linked to the need to invest in our high streets and support small businesses more generally.
We also consulted on an industrial strategy Green Paper, which we published in October, setting out our vision for a modern industrial strategy. With our growth mission, those two strategy papers will ensure we create the conditions for all businesses to invest and grow, and for consumers to be able to spend with confidence. They will help to break down barriers to growth regionally and nationally.
Jobs backed by employment rights fit for a modern economy are at the heart of our plans. In October, we published the Employment Rights Bill, and we will consult to ensure we strike the right balance between the needs of businesses and fairness for workers.
Local growth plans will be a cornerstone of our place-based approach. Locally owned 10-year strategies will set out how mayoral combined authorities will use their devolved powers and funding to drive growth in their regions. That will help to deliver the investment and growth at a local level that our country needs.
Hospitality businesses are not only important to supporting growth in our towns, villages and cities; they are also an integral part of our rural communities. They provide accessible jobs and places for people and communities to come together. In fact, the social value of hospitality is arguably at its greatest in rural and more remote areas. In all areas, hospitality provides opportunities for people to develop important life skills, as well as opportunities for those wanting a fresh start. To enhance those opportunities, we have established Skills England, a new partnership with employers at its heart. It will transform the existing apprenticeship levy into a more flexible growth and skills levy, which will be better suited to support businesses and boost opportunities.
As I mentioned earlier, yesterday I hosted a meeting of the Hospitality Sector Council, which exists to co-create solutions that will help deliver resilience and growth in the hospitality sector. It has done some great work in improving the longer-term resilience of hospitality businesses. I will of course continue to work closely with it as we deliver on our priorities for wider investment and growth, and for reinvigorating our high streets in villages, towns and cities across the UK.
The hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) referred to the lack of business rates relief in Scotland. That is clearly a matter for the Scottish Government, but we will continue to have conversations with all the regions and nations about what else we can do to deliver growth in our country.
A couple of other issues have been brought to our attention. Hospitality businesses on our high streets often face challenges with antisocial behaviour and crime. We are increasing the number of police officers on our streets and in our town centres to bring down antisocial behaviour and crime, and make it easier for people to enjoy the many benefits that the hospitality sector brings.
The hon. Member for Eastleigh raised energy costs. We are setting up Great British Energy not only to accelerate the transition to renewable and net zero forms of energy, but to bring down bills, because we recognise that energy costs have risen in recent years. Great British Energy will certainly help us to bring those costs down in due course.
We all know that hospitality businesses are important. As MPs we recognise that they matter to our constituents, and as individuals we know that they matter to us, our friends and our families. Our high streets are going through a period of transition, from traditional shopping centres to a mix of retail, hospitality and leisure. I assure the House that we recognise the role of hospitality in creating places that people will want to visit, and study, work, live and invest in. As the Minister responsible for hospitality, I will continue to represent the interests of that vital sector, not only in my Department but across Government.