The 2024 Autumn Budget has landed, and for the UK’s hospitality sector, it spells a more challenging time ahead. Rising costs from wage increases, National Insurance changes and reduced rate reliefs are set to squeeze budgets even further.
With these updates, businesses across the industry will feel the strain. Here’s a look at what’s coming and what it means for your business.
What do the minimum wage and National Insurance (NI) hikes mean for hospitality?
For hospitality operators, one of the biggest hits from this Budget will be the combined impact of the new minimum wage and higher NI contributions. For someone on minimum wage, working 37.5 hours per week, these changes mean nearly £1,000 in additional annual costs per employee.
NI for employers has risen to 15%, with the threshold for contributions lowered to £5,000. These increases will push up payroll expenses considerably, especially for small and medium-sized businesses that operate on lean budgets. Whilst the increase from £5,000 to £10,500 in Employers’ Allowance will help a little, for most employers it will be nothing more than small potatoes. Now, more than ever, cost control will be critical.
Business Rates Relief has been reduced
The extension of business rates relief offers some help, but with the rate lowered to 40% this year from the previous 75% and a cap at £110,000, this relief may only go so far in offsetting costs.
For operators contending with high street rents, utilities, and other fixed expenses, the limited support from rate relief will likely mean having to make tough decisions elsewhere. Balancing these rising costs will be essential to maintaining margins.
Alcohol duty cut: a drop in the ocean?
For pubs, the penny-per-pint reduction in alcohol duty on draught beers was intended as a nod of support. But in practice, it’s unlikely to make much difference on the ground. With no reduction in duty on other alcoholic products, many pubs will find this change does little to offset the day-to-day financial pressures.
Pub owners, who already work within tight profit margins, may struggle to see the real impact of this adjustment.
Tronc and tipping changes bring added complexity
Alongside the Budget changes, new rules around Tronc—how tips are distributed—will add further payroll complexity. From 2025, businesses must handle tips through PAYE, which means more time and resources spent on admin. For a more detailed look at these tipping changes and how they may impact your business, see our article on the UK’s new tipping law.
What lies ahead?
All in all, the Autumn 2024 Budget ushers difficult times for the hospitality sector. As costs rise across wages, rates, and compliance, hospitality businesses will need to be agile, balancing finances carefully to adapt to the changing landscape. At Gravita, we’re here to help you plan and budget for these challenges.
If you’re looking for tailored advice on managing costs and keeping your business resilient in the face of change, reach out to our Outsourcing Partner, Sudhir Rawal.
