The Autumn Budget: What It Really Means for Hospitality and How Operators Can Adapt

The Autumn Budget: What It Really Means for Hospitality and How Operators Can Adapt

The recent Autumn Budget brought big promises about supporting hospitality, but the reality for operators feels very different. Rising costs, higher wage commitments and the ongoing burden of VAT and business rates are creating a squeeze that’s becoming increasingly hard to absorb.

At first glance, the government highlighted that lower business rates for hospitality, retail and leisure will become permanent from 2026. On paper, that sounds like relief. But in practice, it sits alongside the end of temporary rate relief and upward revaluations, meaning that for many pubs, restaurants and hotels, business rates will still increase, often sharply.

Wages are also going up. From April 2026, the National Living Wage for workers aged 21 and over will rise to £12.71 an hour. Younger workers will see similar increases. This is positive for employees, and it may help retain people in the sector. But for operators, it’s a significant added cost. UKHospitality estimates these changes could add £1.4bn in extra wage costs across the sector. When labour already represents the biggest cost line, this becomes critical to manage, without compromising guest experience.

What’s not changed? VAT. The 20% rate is here to stay, despite continued lobbying. Other European countries offer hospitality VAT of 10–13%, putting UK operators at a competitive disadvantage. And for customers, higher taxes and frozen thresholds mean they have less discretionary income to spend on dining out, weekend breaks or hotel stays. Operators will face squeezed margins while guests become more price-conscious yet still expect premium service.

Agency labour will become even more expensive, making it harder to rely on flexible staffing without damaging profitability. That puts even more pressure on core teams and retention, something operators are already struggling with.

So, what now? This is where operators must look for new ways to do more with less.

That doesn’t mean stripping away service or replacing humans with screens. In hospitality, people are the powerhouse of the business. We know that tech shouldn’t get in the way of that; it should quietly support it, behind the scenes.

Technology is at its most powerful when it removes admin, improves compliance efforts and gives operators intelligent insight into labour, cost and performance without negatively affecting the guest experience. Platforms that automate tronc distribution, payroll and tipping compliance are now essential. Not just to stay legally compliant, but to protect staff retention, improve fairness and give team members confidence in how their earnings are handled. A well-run tronc scheme can increase employee take-home pay without increasing employer payroll cost to the same degree. It aligns incentives around service, upselling and experience, exactly what operators need when labour costs are rising.

Smart use of technology can also improve scheduling, reduce agency reliance and help match rota decisions to accurate demand forecasts. It lets managers spend more time where they should be: on the floor, coaching teams and supporting guests rather than in the office juggling spreadsheets.

The most successful operators over the next few years will be those who embrace this mindset. They’ll use tech in the background, keep humans in the foreground and deploy tronc strategically to enhance employee earnings, protect retention and support commercial performance. They’ll re-engineer their labour model based on reality, not on how things used to work.

The sector is being asked to operate within high fixed costs, a tight labour market and a price-sensitive consumer environment. Those conditions won’t be reversed anytime soon. But they don’t have to be the end of hospitality innovation. They might just be the beginning of better systems, smarter business models and a renewed focus on what hospitality really is: human connection, delivered brilliantly, supported quietly by the right technology.