Confidence, the ‘missing ingredient’ the Chancellor must find for hospitality sector
Colin Johnson · Posted on: November 25th 2025 · read
"This Budget represents an important opportunity to deliver stability and confidence to a sector that contributes billions to the UK economy but continues to feel the pressure."
Cost environment remains unforgiving
For many, the last few years have felt like a perfect storm of rising costs, shifting consumer behaviour and economic uncertainty. Inflation may be easing, but few hospitality operators would describe the cost environment as returning to normality.
Food and drink costs remain significantly higher than pre-pandemic levels, energy bills – though not as severe as last winter – are still materially elevated, and wage and National Insurance increases continue to push up staffing costs. Passing those increases on through higher prices is risky in a market where consumers are already cautious about discretionary spending.
For hotels, some relief has come through automation and efficiency, from self-check-in systems to AI and digital service tools. Yet, as many hoteliers will attest, hospitality is built on people and personal service. You can automate check-ins, but not a warm welcome. Businesses are therefore having to find smarter ways to preserve staffing for customer-facing roles while seeking marginal gains elsewhere.
Boosting confidence key to growth
While economic growth was the government’s stated priority when it came to power in 2024, recent measures have done little to bolster confidence. Both consumer and business sentiment remain fragile. Many operators say their biggest challenge isn’t just cost, but uncertainty. The stop-start nature of policy changes - whether on tax, employment, or sustainability – makes long-term planning difficult.
Autumn Budget 2025 Summary
Our quick access guide will provide you with clear and precise explanations of the new tax proposals announced in the Autumn Budget.
"The stop-start nature of policy changes - whether on tax, employment, or sustainability – makes long-term planning difficult."
There are of course no easy answers, but confidence breeds spending and the chancellor needs to send a clear message that the UK is a stable environment for investment and growth. A coherent, long-term economic plan, one that doesn’t swing from one philosophy to another, would go a long way to reassuring both businesses and households.
Targeted tax measures could make the difference
The Budget presents an opportunity for the government to deliver practical support that encourages spending and investment. A key area is VAT. The UK remains an outlier among major tourism economies in applying the full standard rate to hospitality businesses. Ireland, for example, has repeatedly lowered VAT for its hospitality sector to stimulate demand and support operators, and with measurable success. The Treasury could consider a similar targeted approach to help rekindle consumer activity and competitiveness.
Business rates are another long-standing burden, particularly given outdated property valuations and inconsistent relief schemes. Any re-rating or withdrawal of reliefs must be handled carefully to avoid further destabilising the sector. Keeping meaningful rate relief in place, particularly for smaller, regional operators, would be a tangible sign of support.
"Any re-rating or withdrawal of reliefs must be handled carefully to avoid further destabilising the sector."
On the investment side, capital allowances could be used more strategically. The previous “super-deduction” encouraged new investment, but future incentives might be better targeted at sectors like tourism and hospitality, especially for spending that drives sustainability or improves energy efficiency.
Succession, skills and sustainability
Recent inheritance tax (IHT) proposals have created anxiety among family-run businesses such as holiday parks and independent hotels, where property values are high and succession plans are often built on assumptions of tax relief. Clarity and fairness in this area are vital to avoid punishing long-term stewardship.
The skills gap remains another concern. With fewer overseas workers filling roles, recruitment challenges, especially in rural destinations, are acute. Some operators that are even repurposing guest accommodation for staff housing. Measures that encourage local employment, training and mobility would provide much-needed relief.
At the same time, many in the sector are embracing the green transition. Younger consumers expect businesses to demonstrate environmental responsibility, and there is enthusiasm for sustainable investment, if the incentives are right. Expanding allowances or grants for energy-efficient upgrades and renewable technologies could deliver both economic and environmental dividends.
"Expanding allowances or grants for energy-efficient upgrades and renewable technologies could deliver both economic and environmental dividends."
Building a framework for growth
Ultimately, what the hospitality sector needs most is stability and confidence. Policies that encourage consumers to spend, reduce unnecessary burdens, and support sustainable investment would help unlock the potential of an industry that employs millions and shapes the UK’s international reputation.
"This Budget should not be about short-term political gestures. It should be about creating a framework for long-term growth, one that gives businesses the confidence to plan, invest and thrive. With clarity, consistency and a commitment to supporting hospitality, the chancellor has an opportunity to set the stage for recovery and deliver the stability the sector so urgently needs."
Autumn Budget 2025 Summary
Our quick access guide will provide you with clear and precise explanations of the new tax proposals announced in the Autumn Budget.
