Why hospitality needs support to be an engine for UK growth #Backhospitality

Since the October 2024 Budget, the hospitality sector has faced unprecedented challenges. Following a significant £3.4 billion cost shock as a result of employer NICs increases, threshold reductions, National Living Wage rises, and business rates relief being cut, the sector has also recorded 84,000 job losses - a larger portion compared to the wider economy.

Favourite venues are closing, and high streets are losing the vibrancy they desperately need. A lack of spirit isn’t the cause behind the decline; instead, it’s the result of insufficient fiscal and employment support, combined with barriers to technological investment that could otherwise improve productivity.

In response to this critical situation, operators have been forced to respond with increased prices, shorter opening hours, and delayed investment. Without targeted action, more venues will be forced to close their doors.

With this in mind, Access Hospitality has submitted formal recommendations ahead of the Autumn Budget, calling for two strategic interventions that will unlock the sector’s enormous potential - Protect our People and Fund our Future

Hospitality is a cornerstone of the UK economy

Few UK industries contribute as much to the economy, or fabric to our communities, as hospitality.
Currently, the sector employs 3.5 million people across every UK region, contributing £140 billion in economic activity annually and generating £54 billion in annual tax receipts [3].

Champa Magesh, Managing Director of Access Hospitality, explains: “Beyond the powerful economic numbers, hospitality is an engine for social mobility by creating accessible employment in every community - jobs, flexible work, and pathways from welfare to work.

It’s also the heartbeat of our high streets - where people connect, celebrate and belong. If the UK Government is serious about its goal of growing the economy from the grassroots, then supporting hospitality is an effective way to help achieve national renewal.”  

The UK Government has demonstrated the effectiveness of targeted support through successful interventions. Despite hospitality matching the below sectors in terms of economic scale and national importance, the same strategic backing has been absent thus far:

• Automotive Sector:

The £2.5 billion DRIVE35 programme and Automotive Transformation Fund have leveraged over £6 billion in private sector investment. This has created thousands of jobs while positioning the UK as a leader in electric vehicle manufacturing.

• Creative Industries:

The £60+ million Creative Industries Sector Plan has supported a sector contributing £125 billion to the UK economy. This has demonstrated that sustained government support enables sectors to fulfil their growth potential.

• Manufacturing Digital Transformation:

The Made Smarter programme achieved 97% satisfaction rates and a £267 million forecast GVA contribution. £20,000 grants leveraged significant business investment, but the programme explicitly excludes hospitality. 

The financial pressure currently weighing on the hospitality sector severely threatens its viability. It’s critical to note the severity of the crisis as one-third of hospitality businesses are now operating at a loss. Furthermore, the sector bears an immense tax burden, with up to 75% of pre-tax profit being paid in tax - more than any other sector. 

This trajectory can’t continue if the hospitality industry is to remain the highest-performing socially productive sector in the UK economy. This is why we are calling for your help.

Together with our customers, partners, and employees, we are calling for the Government to recognise and unlock the UK’s hospitality potential as an engine for growth.

As the UK Government prepares for the Autumn Budget on 26th November 2025, Champa Magesh, Managing Director at Access Hospitality, recommends two strategic interventions to safeguard the future of the sector.

1. Protect our People

Hospitality is the backbone of local and UK high street employment.

However, recent tax policies, including the £5,000 NICs threshold, punish businesses for hiring part-time staff. Hospitality traditionally provided an environment for those seeking their first job, flexible work or transitioning from welfare. Yet, 774,000 workers have been dragged into a punitive tax bracket.

Therefore, we are asking for either a lower NICs band (£5,000-£9,100) at a lower 5% rate for part-time earnings, or exemptions for young people and those moving from welfare to work. Introducing this fairer National Insurance structure protects vulnerable workers.

98% say they’d care if local high streets vanished, highlighting how intrinsic hospitality is to UK culture.

For the first six months of 2025, approximately two hospitality venues closed every day. The April 2025 reduction from 75% to 40% relief has created additional cost pressures, with 1,100 pubs and restaurants closing their doors since the April 2025 budget.

Setting favourable business rates is crucial, as the current system disincentivises growth and penalises high street investment. Immediate cash-flow relief will help curb insolvencies and job losses, incentivise high street investment, provide stability and planning certainty and enhance local competition so smaller venues can remain as hubs in the community.

70% of UK hospitality operators identify VAT reduction as the top priority, and compared to European countries, the UK's 20% VAT rate is among the highest. For example, in Germany, the 7% rate for hospitality food was reintroduced in January 2025.

Reviewing VAT rates in hospitality and providing a roadmap to reduce them to be in line with European counterparts will help high streets compete internationally and address the £46.1m tourism deficit.

A reduced rate, such as 12.5% would deliver net fiscal gains, as despite VAT cuts having upfront costs, tourism, sales, and job creation will be boosted. Reformed VAT will help drive new revenue to coastal towns, regional cities and rural areas across the UK. 

2. Fund our Future 

The closure of Help to Grow Digital (2023) and the pause of Innovate UK Smart Grants (2025) have created a critical gap for the sector, while Made Smarter's £20,000 grants unfairly exclude hospitality. Technological change provides opportunities for productivity and innovation.

Evidence proves that digital transformation support delivers exceptional returns, such as in Germany, where they achieved an average ROI of 13:1 for digital transformation programmes. The UK's Made Smarter programme also delivered a £267 million GVA contribution for manufacturing [15].

The Government’s AI Opportunities Action Plan (January 2025) aims to accelerate AI adoption across sectors with high growth potential. Yet, hospitality is notably absent.

From smarter workforce scheduling and shift optimisation to reducing waste and managing inventory more efficiently, AI can help businesses operate leaner and faster.

We therefore ask that hospitality is included in existing productivity innovation schemes and Innovate UK’s AI Adoption programmes, in addition to a Hospitality Digital Transformation Fund being created.

Provide your support with a signature

Please read and sign the open letter we have issued to the UK government to highlight the importance of the recommendations to support economic growth, social mobility and technological development within the hospitality industry.