Pubs anticipate government’s U-turn on tax hikes, amid industry pressure

Last Thursday, the government announced it would be making a U-turn on its earlier planned hikes to business rates for pubs, following ongoing pressure from MPs, trade groups, and the wider industry.

Hospitality businesses have faced incredibly tough trading conditions in recent years, with rising costs, tight margins, and looming increases to business rates threatening closures and job losses across the country.

This change could be a partial light at the end of the tunnel for many venues, but questions remain about whether the relief will be enough to make a real difference.

What’s changed, and why hospitality businesses welcome the U-turn

Chancellor Rachel Reeves has promised a financial support package for pubs, which would include reductions to business rates.

Before this, the sector was set to face a steep 76% increase in rates bills on average. This was, in part, a result of the withdrawal of pandemic-era reliefs and higher property valuations, meaning fewer businesses would qualify for the lower multiplier announced in the 2025 Autumn Budget.

Industry groups had already warned that the increases could intensify financial pressure. But in recent weeks, pressure has amped up, with trade bodies lobbying ministers and desperate landlords barring Labour MPs from their pubs in protest.

While welcoming the U-turn, industry leaders have remained cautious, stressing that rate reform must go further to fully account for the financial state of the hospitality industry.

What it means for hospitality on the ground

Without change, UKHospitality estimated that the business rate rises would have amounted to a staggering £318m in costs for small hospitality businesses over the next three years.

Thanks to already thin margins, this would have been a blow for many, which makes the government’s reversal feel like a precious bit of good news for a sector that has had so little of it recently.

For pubs and small venues, the reversal will have immediate, tangible benefits. Reduced or delayed business rate bills could provide cash flow relief for struggling businesses, which could help them stay afloat through the quieter first months of the year.

What comes next for pubs and the wider sector?

So far, relief appears to be limited to pubs, leaving much of the wider hospitality sector, including restaurants, cafés, hotels, and nightclubs, still at risk of rising rates. Trade bodies and industry leaders are pushing for wider support for the whole industry, arguing that restaurants and hotels face many of the same challenges as pubs.

“The entire sector is affected by these business rates hikes – from pubs and hotels to restaurants and cafés,” Kate Nicholls, chair of the industry body UKHospitality, told The Guardian. “We need a hospitality-wide solution.”

There are also renewed calls for long-term reform of the business rates system, with campaigners arguing that, as it is, the model disproportionately penalises bricks-and-mortar businesses, which by nature include most hospitality venues, compared with online or lower-overhead sectors.

For now, the government’s promise of a U-turn represents a hopeful step. Whether it becomes a lasting turning point for hospitality will depend on what follows, and whether the government is prepared to address the sector’s challenges beyond short-term fixes.