Business Rates Shake-Up Risks Accelerating Closures Across UK Hospitality

Business Rates Reforms Could Reshape the Hospitality Industry

The UK hospitality sector, grappling with rising costs and post-pandemic recovery, is facing another major challenge: proposed changes to business rates. Announced in the November Budget, these reforms aim to modernise the system and phase out temporary Covid-era relief. But for pubs, restaurants, and hotels, the implications could be severe.

Business rates are a property-based tax applied to commercial premises. Bills are calculated by multiplying a property’s rateable value by a government-set multiplier. The reforms include:

• The 40% discount for retail, hospitality, and leisure businesses will end in April.
• From April, the multiplier will drop from 49p to 43p in the pound. While this sounds positive, many properties have seen sharp increases in rateable values, meaning bills will still rise.
• From 2026, smaller hospitality venues will benefit from the lowest multipliers since the early 1990s, but this won’t offset immediate cost hikes.

The Impact on Pubs

For pubs, the changes could be devastating:

• Average increases of 15%: UK Hospitality estimates the average pub will pay an extra £1,400 this year, even with transitional relief.
• Some landlords report bills jumping from £2,500 to over £20,000 annually, a 92% increase.
• Industry bodies warn that thousands of pubs could shut, putting up to 15,000 jobs at risk.

One pub owner described the situation as “catastrophic,” saying the hike will force them to cut staff and reduce opening hours, impacting customer experience and community life.

It’s not just about pubs:

• Restaurants: Rates bills could rise by nearly 45%, with some Michelin-starred venues seeing costs soar from £50,000 to £90,000.
• Hotels: Premier Inn reported a 200% increase in rateable value for one property, adding £50 million to its annual costs.
• Nightclubs: Some city-centre venues face hikes of up to 76%.thecaterer+2

These increases come on top of other pressures: higher wages, energy costs, and National Insurance contributions, creating what many operators call a “perfect storm” for the sector. There’s only so much of that additional cost that can be absorbed but passing it on to customers means fewer will be able to afford to enjoy hospitality.

Government Response and Industry Reaction

Facing backlash, ministers are reportedly preparing a U-turn. Options include:

• Short-term relief for pubs.
• Changes to rate calculations.
• Licensing flexibility to boost revenue opportunities.

Ian Cass, MD of the Forum for The problems of British Pubs says: Problems for Britain’s pub trade have been building for many years, and successive governments have failed to understand the issues and complexity so there’s been no viable solutions. The hospitality industry as a whole needs people to serve people, and technology and AI doesn’t work here you need skilled well-trained people. The risk and cost of taking on those people are increasing dramatically. A change to business rates is just scratching the surface and deals with one of the symptoms but not the disease. Ministers need to engage better with the trade and find some real long-term solutions. A hospitality-wide solution is essential. Targeting pubs alone will leave restaurants and others exposed. Pubs and hospitality venues are more than businesses. They’re community hubs and major employers. Sharp increases in fixed costs risk accelerating closures, hollowing out high streets which need good pubs and restaurants to attract shoppers in, and reducing job opportunities, particularly for young people who rely on hospitality for entry-level work.

What’s Next?

The government is expected to announce a revised package in the coming days, but uncertainty remains. Industry bodies continue to lobby for:

• Extended relief across the sector.
• Simplified transitional arrangements.
• Long-term reform to make business rates fairer for bricks-and-mortar businesses competing with online giants.yahoo+1
• The proposed changes to business rates highlight a tension between fiscal policy and economic reality. While the government aims to create a fairer system, the immediate impact on pubs and hospitality businesses could be severe without targeted support. This isn’t just about tax. For many it’s about survival.