Insights

What This Years Budget Really Means for Retail & Hospitality

Colin Johnson · Posted on: January 28th 2026 · read

The Budget may not have delivered the headline shocks some feared, but it has set the stage for a year of quiet but powerful shifts. For retail and hospitality, these changes will shape demand, cost structures, and competitive dynamics in ways that matter.

Here is what I believe is coming, and what leaders should do now.

Spending power will keep slipping

Freezing income tax and NIC thresholds for another three years sounds benign, but it’s a slow squeeze. Disposable income will erode, and more pensioners will pay tax for the first time. That means customers won’t stop spending, but simply, they’ll spend differently. We should expect smaller baskets, trading down within categories, and more focus on value.

Share this article

Related tags

Industries

Retail, Consumer and Hospitality

Explore our full 2026 Predictions

Businesses must protect their visit frequency. Build clear “good–better–best” price points and introduce value rituals—think fixed-price menus, bundles, loyalty perks—that keep customers coming back without destroying margins.

Labour costs will make businesses rethink

"The sharp rise in the National Minimum Wage, especially for younger workers, will hit hospitality and retail hardest. These sectors rely heavily on entry-level staff, and the economics of hiring will change. Businesses will need to redesign roles, not just cut hours – this includes automating routine tasks while focusing human effort on service moments that matter."

Colin Johnson, Partner

Businesses will need to invest in tech for ordering and back-of-house processes. Cross-training staff will be needed and measuring training ROI in terms of speed to competence and upsell success will be more prevalent.

Business rates will shape location strategy

Rates reform creates winners and losers. High-value properties including larger retail units and premium hotels will likely feel the pain. Expect capital to shift toward regional markets and smaller, experience-led formats. Companies should review their estate now, and consider a rebalance toward rate-efficient locations and negotiate turnover-linked leases where exposure is highest.

Domestic travel patterns will change

Higher fuel duty and an EV mileage tax will make long-distance UK breaks less attractive. Urban and rail-accessible destinations will gain share, while rural operators will need to work harder to attract visitors. Those in the industry should consider creating car-optional packages, partner with transport providers, and invest in EV charging as a visible amenity.

International visitor numbers and projected to increase

It is anticipated that international visitor numbers will continue to grow over the next year, generating around a quarter of economic activity in the sector. Global travellers are increasingly looking to enjoy rural locations, but continue to base their itinerary around travel into London. The new generation of travellers are focused on eco-friendly credentials, purpose and wellness driven holidays. Although the pound is strong, the UK remains an expensive destination, so it is imperative that operators understand their market and deliver the experience that is being sought.

The Big Picture

MHA’s Industry Predictions for 2026

This Budget doesn’t rewrite the rules…but it does tilt the board. The businesses that act now on pricing, labour, estate strategy, sourcing, and travel patterns will be the ones that thrive in 2026. Waiting for the P&L to tell you what’s changed will be too late.

If you’re asking, “How do we turn these predictions into a plan?” – you should start now.

Review your estate and labour model against these trends.
Stress-test your pricing and sourcing strategies.
Critically appraise your employee costs and ensure labour is being deployed in areas of the business that customers value and consider automation in areas where they don’t.
Focus your business plan on providing the services that customers value and are willing to pay for.
Build a roadmap for automation, loyalty, and location strategy.

At MHA, we’re helping retail and hospitality leaders translate these signals into action, from tax planning and cost modelling to operational redesign and growth strategy. Let’s talk about how your business can get ahead of these changes.