Give Us a Break

Bruised by economic headwinds and rising taxation, UK hospitality businesses are desperate for some relief. But did the Budget deliver the goods?

After several years of high costs and stubborn inflation, the hospitality sector deserves a massive break. What it got was some pain relief: the threshold for full Small Business Rate Relief for qualifying retail, hospitality and leisure properties in England will rise from a rateable value of £12,000 to £18,000 from April 2027. In other words, more small businesses will qualify to pay no business rates at all.

Yet alcohol duty will rise by 4.55% from February 2027, while calls for a reduction in hospitality VAT went unanswered. Having lobbied for a VAT cut from 20% to 10%, Tony Cleary, CEO of the Lanchester Group, observes that "most food bought from retail is zero-rated for VAT, yet serve food in a pub or restaurant and it attracts 20%. Why?"

UKHospitality chief executive Allen Simpson acknowledged that it was "the first Budget in several years to deliver any positive news for hospitality at all", yet he urged the government "to go further, faster, to address the unequal tax burden on the sector, and to help us unlock investment."

Meanwhile, the mood music across the industry remains anxious, at best. NIQ's Hospitality Market Monitor  recorded 305 net closures of licensed premises in Britain during the first quarter of 2026, equivalent to 3.4 a day. In a July survey by UKHospitality and other trade bodies, 23% of respondents said they were operating at a loss, up from 15% three months earlier, while one in six said their business was at risk of failure within 12 months.

This may explain why, in recent interviews with hospitality owners about government policy, the language has often been unprintable.

"For hospitality, the impact has been horrendous," says Cleary. "We've seen good, long-established businesses reach the point where the numbers simply don't stack up anymore." Describing an industry on its knees, Cleary adds that even "strong operators are struggling through no fault of their own, largely as a result of the cumulative impact of policies coming out of the Treasury." What's at stake, however, is not just an existential threat to pubs and restaurants, but the future of the UK wine trade and the brand-building opportunities that hospitality provides.



Death of a night out

For more than a decade now, structural changes in UK drinking habits compounded by the economics of operating a hospitality business have reduced the size of the on-trade market for wine. According to Liberty Wines' 2026 Premium On-Trade Wine Report, only 13% of wine was consumed in the on-trade in 2024, down from 18% in 2019. The report also found on-trade wine volumes down 8% over the preceding year, with value falling 5% in the premium on-trade and 4% outside it. Indeed, many businesses have restructured their portfolios in response to persistent inflation and reduced consumer spend, simplifying ranges and cutting underperforming lines.

"We're seeing fewer SKUs, tighter wine lists and a stronger focus on margin management," says Cleary.

"Wine has been especially affected. Many operators can no longer afford to carry a broad range, which limits consumer choice and changes the overall nature of the offer."

This is, of course, bad news for wine brands hoping to make a name for themselves. Mr and Mrs Esoteric Grape need the on-trade: where else can expert guidance, in the convivial setting of a restaurant or wine bar, turn curiosity into a first glass, that glass into a bottle and, hopefully, that bottle into a new favourite?

Unfortunately, Rupert Pritchett, managing director of Taurus Wines, describes the local hospitality landscape as "beginning to resemble a rather melancholy game of musical chairs – except someone keeps removing chairs and nobody is particularly laughing". As venues become insolvent, the opportunities for consumers to discover unfamiliar wines and producers disappear with them.



However, the issue isn't just operators closing their doors for good. Even businesses that struggle on are increasingly forced to be ruthless in their choices, particularly when it comes to staffing and procurement. "We will be employing fewer people," says Owen Morgan, co-owner of the Bar 44 hospitality group.

"We have to do that; it's sadly not an option. We will employ fewer, as will everyone. Consumers will also suffer. We will also not be taking on younger people - the government wants us to, but it has made it nearly impossible." In October, 17 hospitality leaders under 30 issued a joint statement coordinated by UKHospitality calling on ministers to reduce employer National Insurance contributions and protect entry-level jobs. They warned that opportunities for young people were becoming "few and far between". It's just a shame no one in government was listening.

Survival strategy

I don't want to be accused of peddling dystopia porn, however. More positively, operators are adapting, and the UK picture is not universally negative.

"2025 was our highest performing year ever, and we haven't seen any change in that momentum yet despite the macroeconomic effects of what's going on the world stage," says Kevin Styles, CEO at The Pig Group.

He acknowledges "year-on-year cost increases" but says the group is responding by focusing on efficiency and effectiveness, while using technology alongside its long-standing commitment to hiring and developing great people.

Nevertheless, operators across the UK are facing mounting pressure to manage wine stock ruthlessly and list commercially viable lines. Pritchett points to a wider cultural shift, already under way, towards wines that "sell themselves" as staffing costs increasingly prohibit the hiring of experts on the ground.

"The hospitality sector has been trimming staff with such enthusiastic efficiency that the concept of a dedicated sommelier now exists largely in the same category as being served at the pump in a petrol station. It's a job of the past. Sadly, you cannot train a QR code menu to get excited about an obscure Jura producer," he observes.

"Our role has therefore evolved somewhat. Rather than inspiring teams who no longer exist, we focus on building wine lists that sell themselves - approachable, well-structured and with enough margin baked in to justify their place without requiring a full-time advocate to champion them."



The health of the UK hospitality industry is no small matter for the trade: it was traditionally one of wine's most valuable routes to relevance, recommendation and growth. But without urgent action, it is likely to remain on life support.