What’s predicted for 2025?
- National insurance – rising 15% from April
- Business rates – decreases from 75% to 40% for 2025/26 tax year
- Living wage rising to £12.21
- Quality has overtaken value as a consumer need, however value remains just as important
- Consumers are putting more scrutiny on value – seeking immediate gratification in reward schemes
- Healthier eating is developing and changing all the time
- Sustainability remains a priority – low waste is a core focus
- Experience is key – with competitive socialising formats on the rise
- Operators are diversifying to meet convenience needs
Understanding the budget and its impact on our industry...
The Budget unveiled £3.4 billion in cost increases for the hospitality sector which will have a devastating impact on businesses.
It could potentially cause closures, job losses, constrain investment, wage increases, and a spike in inflation due to additional costs throughout the economy, including for consumers.
For wholesalers, the new Living Wage increase will add an estimated £110m in direct wage costs, whilst National Insurance increases will add £31m in costs a year.
Two-thirds of our suppliers and customers are SMEs, and many will struggle to survive these tax hikes on top of the minimum wage increase and Employment Rights Bill.
The rises come from:
- Employer NICs – an increase in the main rate from 13.8% to 15%, but crucially for hospitality saw the threshold at which the tax is paid fall from £9,100 to £5,000, drawing in thousands of part-time hospitality workers
- NICs changes will cost hospitality £1 billion
- Employer NICs for a part-time worker (15 hours) will increase by 73%
- The total NICs bill for a full-time worker on minimum wage is now £2,900, up over £1,000
- The National Living Wage (21+) increased by 6.7% from £11.44 to £12.21, higher than the Low Pay Commission’s midpoint estimate of £12.10. The 18-20 rate increased by 16.3%, from £8.60 to £10.00. The 16-17 rate and the apprentice rates rose by over 18%
- Minimum wage rate changes will cost the sector £1.9 billion, compelling businesses to increase prices
- There is a real risk to youth employment as increases begin to bite
- Total increase (NLW and EmNICs) of employing a full-time worker increased by £2,500
- Business rates relief in England was cut from 75% to 40% for the 2025/26 tax year, and the cap on relief remained at £110,000. Reform was announced for 2026/27 that will see a new multiplier for hospitality, retail, and leisure
- £500m increase for hospitality through a cut in relief
- Multi-site businesses are still restricted from benefitting from relief
What determines the impact of these measures on a business?
- Its labour intensity
- Ability to pass on costs to customers
- Business scale, size, and efficiency
- Proportion of workers near minimum wage
- Reliance on part-time workers
- Geographical location and customer-base demographics
- According to UK Hospitality, the budget will increase the cost of full-time employment by at least £2,500 per person
Who is impacted by the budget?
Sectors least impacted:
- Travel hub food outlets
- QSR with higher automation
- Delivery focused operators with lower staff requirements
- Premium/luxury operators with greater ability to pass on cost increases
- Businesses with a younger workforce already near minimum wage levels
- Larger managed groups with greater economies of scale
Sectors most impacted:
- Businesses with a high proportion of part-time workers
- Value-focused operators unable to pass on cost increases to consumers
- Labour-intensive table-serve restaurants
- Smaller/independent restaurants, pubs, indoor play centres/leisure venues and caterers
- Tenanted pub operations and local/rural/community establishments with limited ability to increase prices
- Wet-led businesses (limited opportunity to offset through food margins)
- Small hotels with high staff-to-room ratios
How will alcohol be impacted?
- Duty rates on alcohol are changing from 1st February 2025
- Duty on non-draught products will increase by 2.7% in February, while draught duty will be cut by 1.7%, which will mean the equivalent of a penny off a pint
- However, alcohol duty will increase in line with the Retail Price Index inflation from next April, having been frozen since September 2023
- Due to the government’s new method of calculating duty, this will result in price changes across the entire industry
How we can support you
Through our procurement expertise, first-hand operational experience, supplier partnerships, and determination to drive value, we are focussed on keeping costs in check and offering value beyond price.
We believe in an honest, transparent approach, working through challenging market dynamics directly with our members to find the best solution.
Our commitment is to help you manage costs and create efficiencies across your business. Working with suppliers like Bidfood, we source quality products with long-term sustainable pricing and work hard to find additional ways to save members money through menu engineering and recommended product swaps.
Source: Bidfood