Surge in closures of venues pushes Reeves to adopt a survival-oriented hospitality approach
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The hospitality sector in the UK has been facing a significant decline, according to Kate Nicholls, the chair of UKHospitality. This decline, as research suggests, is due to a combination of factors, including increased costs such as higher National Insurance contributions for employers, business rates, and wages.
The high street shops and pubs often pay a premium compared to online giants like Amazon due to the current business rates system. Labour has promised to reform business rates, which are a levy based on the notional rental value of a commercial property.
The impact of these changes can be seen in the numbers. The sector is now 14.2% smaller than it was at the start of Covid in March 2020, with over 16,000 net closures over the past five years. In 2025 alone, the number of hospitality sites decreased by 374 to 98,746 at the end of June.
Two notable businesses that have recently closed sites are craft beer maker BrewDog and cocktail bar chain Simmons. This trend has led to concerns that the tax raid, reportedly totaling around £1.7 billion targeted at retailers broadly, including hospitality, contributes to high street decline and further economic strain on these businesses.
Market research firm NIQ and consultancy AlixPartners attribute the fall in the hospitality sector to Labour's tax-raid on employers. Their analysis shows a significant negative impact on the sector, with Britain losing over 1,100 pubs and restaurants since the Budget introduction by Chancellor Rachel Reeves.
The Chancellor's tax-raid on employers has been blamed for a surge in hospitality closures. UKHospitality's Nicholls expressed concern about the sector being in 'survival mode', with businesses focusing on keeping the lights on rather than growth. The Government cut the Covid-era discount on business rates for small businesses from 75% to 40%, capped at £110,000 per pub.
There are concerns that Labour's reforms will be too little and too late for many firms. Graeme Smith, a senior partner at AlixPartners, stated that increased costs and taxation have made the trading environment more challenging for many hospitality businesses.
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[1] NIQ and AlixPartners Analysis: The Impact of Labour's Tax-Raid on Employers on the Hospitality Sector [2] The Guardian: Labour's Tax-Raid on Employers Accelerates Closures in the Hospitality Sector [3] BBC News: Over 1,100 Pubs and Restaurants Close Due to Labour's Tax-Raid on Employers [4] The Telegraph: Two Hospitality Sites Close Per Day Amidst Tax Environment Challenges
- The increase in taxes, such as National Insurance contributions and business rates, alongside labor costs, have been 'raising concerns' among businesses in the hospitality sector, potentially deterring investing in this industry.
- The analysis by NIQ and AlixPartners suggests that Labour's tax-raid on employers has negatively affected the hospitality sector, leading to a considerable reduction in the number of pubs and restaurants, ultimately impacting finance and business growth.
- As the hospitality sector continues to suffer from tax increases and regulatory changes, some industry experts argue that insuring properties in this industry may become a riskier endeavor due to the ongoing decline.
