Budget 2025: How it impacts the Hospitality sector

Margins tighten, pressure increases - and the need for smarter, more efficient operations becomes non-negotiable.

But hospitality is resilient. The sector will adapt, as it always does - with better processes, smarter tech, and increasingly, AI-powered ways of working.
Below is a stripped-back view of what’s changed, what it means, and where operators can take control.

1. What’s changed

A few welcome wins

• Lower business-rates multipliers from 2026 for many businesses
• Smaller venues benefit most, particularly those with lower rateable values
• Short-term boosts to consumer spending via frozen fuel duty/rail fares and temporary energy support.

But new pressures dominate:

• Higher wage and employment costs — NLW rising again to £12.71 for 21+ from April 2026 onwards.
• Frozen tax thresholds pull more consumers into higher tax bands, meaning less discretionary spend.
• Rateable values up in many locations, offsetting the future multiplier cuts.
• Higher taxes on dividends and business sales hit long-term investment decisions.
• Costs remain elevated across labour, energy, and supply chains.

What it means for operators:

Many operators remain sceptical. While business-rates relief is welcome, UKHospitality warns the sector still faces “the highest tax burden in the economy.” Larger venues - hotels, big pubs, and chains - are especially vulnerable, as revaluation could push rates higher and make some sites unviable.

Our Business Confidence Survey (with CGA by NIQ) highlights the strain: only 34% of leaders feel confident about their own business over the next 12 months, and 15% about the wider sector. Wage pressures are the top concern for 91% of operators, and 80% report labour costs are already significantly higher than a year ago.

Operators are taking tough measures: staff reductions, fewer hours, deferred pay rises, and reduced training. Nearly three in five leaders have less than six months of cash reserves, and one in ten are concerned about business viability.

As Karl Chessell from CGA notes:

The double whammy of higher costs and softer trading has hit hospitality businesses hard. Many of these increases — from labour bills to taxes — are out of operators’ control. These costs are putting real pressure on businesses and affecting the investment and employment that are so important to the UK economy.

Karl Chessell, CGA

Paul Watson, from Sona adds:

Operators are facing mounting pressures on all sides, and the temptation to cut back on hours, teams or investment is completely understandable. But when margins are already tight, every peak period becomes even more valuable – and without the right people in place, those vital revenue moments can slip away.

Paul Watson, VP of Hospitality at Sona

What is in our control:

The Budget reinforces a reality many operators already live: efficiency and flexibility are more important than ever. Operators are focusing on a few key areas:

• Optimising schedules to reduce unnecessary overtime
  
  
• Improving forecasting of demand, labour, and cash flow
  
  
• Reinvesting business-rate relief into technology, training, and process improvements

Even with long-term reforms on the horizon, near-term pressure is real. Businesses that lean into operational excellence and support their teams are better positioned to weather challenges.

How Sona Helps

Small improvements add up. At Popeyes UK, three weeks with Sona delivered a 0.5% labour saving, rising to 0.8% in six weeks. Forecasting became more accurate than managers’ own estimates, giving teams clarity when planning rotas. Sites that overrode the system struggled, proving the value of consistent, data-driven scheduling.

Over 30 managers now rely on Sona; scheduling time has been cut in half, and 100% of staff use Sona Comms. Importantly, tighter rotas haven’t compromised customer experience - NPS is rising, showing operational efficiency and service quality can go hand in hand.

Since implementing Sona in July, we’ve realised more than 0.8% in labour savings… we expect this to grow to over 1% by the end of 2025.

Neil Williamson, COO, Popeyes Louisiana Kitchen

Even a 1% labour improvement matters in today’s environment of rising wages, higher National Insurance contributions, and increased business costs. Small savings can protect margins, safeguard jobs, and give operators room to trade confidently.

If you’d like to learn more, book a chat with the team to explore AI and tech solutions for business performance - or request an invite to our next Hospitality Leaders AI event.