Support for pubs and the hospitality sector

Background

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

In 2023 the economic output of the hospitality sector (food & accommodation services) in the UK was £62.5 billion. This corresponded to around 2.8% of total UK economic output. The relative importance of hospitality to the economic output of each country and region is similar: hospitality makes up 3-4% of the total economic output for each UK country and region.

There were 2.8 million jobs in the hospitality industry in the UK in the three months to June 2024, representing 7.5% of all UK jobs. The hospitality sector was the sixth largest employer, based on the main industry sectors.

The hospitality industry has higher proportions of younger workers, foreign-born workers, part-time workers and workers from minority ethnic backgrounds compared to other sectors. Median hourly pay is lower in hospitality compared to other sectors.

Recent challenges

According to the Office for National Statistics' Business Insights and Conditions survey, energy prices, falling demand for goods and services, and taxation were the main challenges hospitality businesses expected to face in October 2024. Businesses also report being concerned about the cost of materials and labour.

Energy prices

Research by trade body UK Hospitality found that, in the year to May 2023, their members' energy bills had risen on average by 80%.

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 September 2024, annual inflation was 2.6%, and inflation on food and non-alcoholic beverages was 1.8%.

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

Staffing

The hospitality sector has always had a higher vacancy rate than the economy overall. In the three months to September 2024, there were 3.6 vacancies per 100 workers in the sector. The average across all industries is 2.6 vacancies per 100 workers.

In April 2024, the National Minimum Wage had its largest ever increase, from £10.42 an hour to £11.44 an hourfor employees aged 21 and older.

Government intervention Business rates relief

Business rates are devolved to Scotland, Wales and Northern Ireland.

In 2020/21, a discount of £5,000 was available on the rates bills of all pubs in England with a rateable value of under £100,000. The Welsh government announced an identical scheme on 17 March 2020. No equivalent scheme operated in Scotland or Northern Ireland.

Since 2020/21, the UK government has also operated a business rates relief scheme for properties in the retail, hospitality and leisure sector in England. Similar schemes were operated in Scotland and Wales.

Draught relief

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.

Ahead of the budget on 30 October, UK Hospitality has called on the government to make permanent new lower business rates for hospitality businesses. It has also asked the government to reintroduce VAT relief and reform the Apprenticeship Levy.

Press

National Insurance fears spark business backlash

Michael Race

BBC, 15 October 2024

Pubs face double whammy of tax rises, warns industry

Sian Bradley

The Times, 23 September 2024

Fifty pubs a month shut in first half of year in England and Wales, figures show

Jack Simpson

The Guardian, 23 September 2024

Level of VAT paid by pubs branded ‘extraordinarily demoralising’

Rebecca Weller

Morning Advertiser, 20 September 2024

Small brewers need help to craft their way to survival

Tom Saunders

The Times, 18 March 2024

Parliamentary material

Question for Ministry of Housing, Communities and Local Government: Public Houses

Question for the Department for Business and Trade: Public Houses: Government Assistance

Hospitality Sector: Fiscal Support

HC Deb 31 January 2024, c 310WH–326WH

Library publications

Tourism: statistics and policy

House of Commons Library, 7 November 2023

VAT on tourism and hospitality services

House of Commons Library, 12 February 2024

Hospitality industry and Covid-19

House of Commons Library, 12 May 2022