The UK’s hospitality sector is facing a potential £900 million financial blow when business rates relief expires in spring 2024, prompting urgent calls for reform.

Industry leaders have warned that without action from Chancellor Rachel Reeves in the upcoming budget, business rates will quadruple when relief ends on 31 March, costing the sector an additional £914 million.

A group of 170 hospitality business leaders, including the heads of major pub chains like Greene King and JD Wetherspoon, as well as representatives from high street venues such as Caffè Nero and IHG Hotels, have written to the chancellor, calling for immediate reform. In their letter, they urged the government to introduce a lower, permanent business rates multiplier for the hospitality sector across all UK nations.

UKHospitality, the industry’s trade body, has emphasised that the budget is the government’s “last chance” to prevent a significant increase in costs that could devastate the sector. Kate Nicholls, chief executive of UKHospitality, warned that the increase would lead to more closures, leaving high streets with shuttered venues and rising vacancy rates.

Business rates burden stifles growth

The hospitality sector, which includes pubs, restaurants, cafes, and hotels, has benefited from business rates relief since it was introduced in 2020 as part of the government’s pandemic response. However, with the relief set to end in just over five months, the industry is concerned about the long-term implications of a quadrupling tax burden.

The 170-strong group of hospitality bosses pointed out that the current cap on business rates relief has discouraged expansion, with many venues deeming the cost of opening additional locations too high. This stifling effect on growth is compounded by the fact that business rates are seen as disproportionately high compared to the economic activity of the sector.

“The current tax system discourages people from running high street businesses,” the group stated in its letter. “The government should be encouraging growth and investment, not making it harder for businesses to operate.”

Without reform, UKHospitality has cautioned that the industry could see a sharp increase in business failures and a reduction in investment, which would have far-reaching consequences for both local economies and the government’s broader growth agenda.

The wider impact on high streets

The threat to the hospitality sector comes at a time when the government is trying to revitalise high streets and encourage investment in local communities. Nicholls argued that without changes to business rates, the government risks undermining its own growth goals.

“Further closures will be so detrimental to the government’s growth agenda and put a dent in our sector’s ability to create places where people want to live, work and invest,” she said. “If we don’t want to lose out on vital investment, job creation, and the regeneration of our high streets, then the chancellor needs to act to introduce a lower level of business rates for hospitality at the budget.”

Other trade bodies, including the British Retail Consortium, have echoed these concerns. The consortium has argued that high business rates are contributing to a wave of shop closures, job losses, and social as well as economic costs on high streets across the UK.

A call for fairer taxation

As the government comes under increasing fiscal pressure, the hospitality sector has suggested that rebalancing the tax burden could offer a solution. UKHospitality and other industry leaders believe the current system unfairly penalises hospitality businesses, which are paying a disproportionate share of business rates relative to their level of economic activity.

By reforming the business rates system, they argue, the government could support long-term investment in the sector while helping to create jobs and revitalise high streets. As the spring deadline approaches, the industry is urging the chancellor to take decisive action in the upcoming budget to avoid a significant crisis in one of the UK’s most vital sectors.