When the Autumn Budget landed, food and drink leaders warned ministers that the tax increase would cost the British Hospitality industry £3 billion and force businesses to reduce investments, cut jobs, and raise customer prices.
Our own calculation puts the impact of the Autumn budget at £1,365,445 annually for a 30-unit restaurant chain with 500 people on payroll. This sharp rise in expenses puts significant pressure on profit margins for restaurants and pubs.
In this article, we break down the key changes and share practical strategies to help you maintain profitability.
A Different Narrative: Is There a Silver Lining?
Before we dive into the challenges of the Autumn Budget 2024, let’s step back and look at the bigger picture.
No one welcomes a tax increase. After Brexit, lockdowns, supply chain disruptions, the energy crisis, and soaring inflation, this Budget feels like it has arrived at the worst possible time.
But there’s another side to consider: people are still dining out, ordering in, connecting with friends, and exploring new experiences. This ongoing demand suggests that opportunities for innovation and growth still exist—even if they no longer lie in the traditional approaches (as highlighted in The Restaurant Industry Report).
Encouragingly, UK food price inflation has dropped to a manageable 2%, offering businesses some breathing room. And while higher wages add to costs, they also help attract and retain the skilled talent the industry urgently needs.
The obstacles we face won’t just disappear.
And then there’s the age-old truth: every crisis presents an opportunity. Yes, entrepreneurs deserve a break, but the obstacles we face won’t disappear. The quicker you adapt and innovate, the stronger your competitive advantage and the better you will be prepared for an unknown future.
In his January newsletter, Peter Backman talks about how outside forces shake up the restaurant industry.
“This very confluence of pressures might be exactly what the industry needs. Why? Because sometimes it takes a crisis to drive innovation. Nowadays, restaurants can no longer rely on incremental tweaks to their business models. The old playbook of simply raising prices or trimming portion sizes won’t cut it anymore. Instead, maybe we’re seeing the early signs of a fundamental reinvention of how restaurants operate.”
While headlines focus on the challenges, the hospitality industry is transforming into a more resilient and professional sector.
While headlines focus on the challenges, something remarkable is happening beneath the surface: the hospitality industry is transforming into a more resilient, professional, and respected sector.
Look at today’s successful restaurants. They no longer operate on instinct alone but operate as sophisticated businesses. They combine the warmth and passion of traditional hospitality with modern practices, using data analytics to understand their customers, technology to streamline operations, and professional management techniques that rival those of top MBA graduates.
In short, no one welcomes higher taxes, especially when the industry is already under pressure. The challenges ahead are significant and unlikely to disappear soon, but they also present an opportunity for reinvention.
With that in mind, let’s explore the details of Chancellor Reeves’ Budget and what it means for the hospitality industry.
What is the Autumn Budget?
The Autumn Budget is a key financial statement from the UK government. It is announced every year, usually in October or November. It outlines the government’s plans for taxation, public spending, and economic priorities for the upcoming fiscal year and beyond.
The Budget is presented by the Chancellor of the Exchequer, the UK’s finance minister, in the House of Commons.
Why are UK Restaurants Concerned About the 2024 Autumn Budget?
The restaurant industry is known for its slim profit margins. Reports show profit margins ranging from 2% to 15%, with the average widely accepted at 3%-5% for restaurants. Bars and pubs usually perform better, averaging around 12.5%.
Tight margins mean even small cost increases can cause financial strain or closures. The Autumn Budget raises costs substantially, creating significant challenges for foodservice businesses.
The UKHospitality Association has expressed deep concerns, saying the budget forces the sector into “survival mode” instead of encouraging growth.
Kate Nicholls, Chief Executive of UKHospitality, warned that these changes could raise the overall hospitality wage bill by as much as £1.9 billion. Similarly, Stephen Montgomery of the Scottish Hospitality Group noted that some estimates predict a 10% rise in operating costs.
Many in the industry fear these measures could lead to:
- Slower growth or closures of small, independent restaurants that cannot handle rising costs.
- Higher menu prices to offset expenses, potentially driving away customers.
- Delays or cuts in investments for sustainability and innovation due to financial pressures.
When Will the Autumn Budget 2024 Take Effect?
Chancellor Rachel Reeves presented the UK’s Autumn Budget 2024 on 30 October 2024. The changes will officially take effect on 1 April 2025.
Some businesses may feel the impact earlier as they begin budgeting for the changes or negotiating contracts that factor in higher costs.
Key Changes: How Does the Autumn Budget 2024 Impact Restaurant Chains?
The Autumn Budget 2024 brings several key changes directly affecting UK restaurant chains. Below is a summary of the most significant updates and their potential implications for the restaurant industry.
- Business Rates Relief: The relief rate will decrease from 75% to 40%, capped at £110,000 per business for the 2025–26 tax year.
- National Living Wage (NLW): The National Living Wage increases by 6.7%, rising to £12.21 per hour for workers aged 21 and older.
- Employer National Insurance Contributions (NICs): Employer NIC rates will rise from 13.8% to 15%. Additionally, the tax-free threshold drops from £9,100 to £5,000.
- Youth Wages: Wages for workers aged 18–20 will rise by 14.8%, increasing to £10 per hour.
What is the Impact on a 500-Employee Restaurant Company?
To understand the financial impact of the Autumn Budget 2024, we analysed an average restaurant chain with the following assumptions:
- 500 employees on the payroll (a mix of full-time and part-time staff).
- Average annual salary: £25,000 per employee.
- 30 locations, each paying an average of £12,122 in annual business rates.
Below is a breakdown of how the key policy changes affect the bottom line.
| Category | Before (2024) | After (2025) | Impact on Restaurants |
| National Living Wage (NLW) | £11.44/hour for workers aged 21+ | £12.21/hour for workers aged 21+ | Increased labour costs: ~£1,501 per employee annually. For 400 employees, it adds ~£600,400/year. |
| Youth Wage (Aged 18–20) | £8.71/hour | £10/hour | Significant cost increase: ~£2,013 per employee annually. For 100 employees, it adds ~£201,300/year. |
| Employer NICs Rate | 13.8% above the £9,100 threshold | 15% above the £5,000 threshold | NICs increase by ~£802 per employee earning £25,000/year. For 500 employees, it adds ~£401,000/year. (*) |
| Business Rates Relief | 75% relief, no cap | 40% relief, capped at £110,000 per business | Multi-location chains lose more relief due to the cap. For 30 locations, total relief drops by £162,745, leading to much higher property costs. |
| Employment Allowance | £5,000 for eligible businesses | £10,500 for eligible businesses | Smaller businesses benefit; larger chains are unlikely to qualify due to eligibility limits (e.g., NIC bill must be under £100,000 annually). |
| Draft Business Rates Relief Legislation | No permanent relief | Permanent relief proposed from 2026 | A long-term benefit for hospitality businesses if the legislation passes, though the immediate impact is limited. |
| Alcohol Duty | Reduced for draught beer; others increase | 1.7% reduction for draught beer; RPI-indexed increases for other alcohols | Minimal relief for restaurants serving draught beer; higher costs for spirits, wine, and bottled beers will likely lead to higher menu prices. |
(*) This change is especially burdensome for the hospitality sector, which relies heavily on part-time workers. More part-time employees will now earn wages above the NIC threshold, meaning businesses will pay NICs on a larger portion of their payroll. While individual salaries may remain low, the cumulative effect of a high number of part-time workers will make the total NIC bill significantly larger.
Labour Cost Breakdown
1. National Living Wage Increase:
- Assume 400 employees (aged 21+) work full-time (37.5 hours/week).
- Current wage: £11.44/hour; New wage: £12.21/hour.
- Annual increase per employee: £0.77/hour × 37.5 hours/week × 52 weeks = £1,501.
Total extra costs for 400 employees: £1,501 × 400 = £600,400 annually.
2. Youth Wage Increase (Aged 18–20):
- Assume 100 employees in this category, working 30 hours/week on average.
- Current wage: £8.71/hour; New wage: £10/hour.
- Annual increase per employee:
£1.29/hour × 30 hours/week × 52 weeks = £2,013.
Total extra costs for 100 employees: £2,013 × 100 = £201,300 annually.
3. Employer NICs:
- Assume an average annual salary of £25,000 for 500 employees.
- NIC increase per employee:
Current NICs: (£25,000 – £9,100) × 13.8% = £2,198.
New NICs: (£25,000 – £5,000) × 15% = £3,000.
Increase per employee: £3,000 – £2,198 = £802.
Total extra NIC costs for 500 employees: £802 × 500 = £401,000 annually.
>> Total Labour Cost Impact:
£600,400 (NLW for 21+) + £201,300 (Youth Wages) + £401,000 (NICs) = £1,202,700 annually.
Business Rates Impact
Let’s assume the restaurant chain runs 30 locations, each with an average rates bill of £12,122/year.
- Relief under 75%: £12,122 × 0.75 = £9,091.50.
For 30 locations: £9,091.50 × 30 = £272,745. - Relief under 40%: £12,122 × 0.40 = £4,848.80.
For 30 locations = £4,848.80 × 30 = £145,464
But capped at £110,000
>> Total additional cost for 30 locations:
Relief lost: £272,745 (old relief) – £110,000 (new relief) = £162,745 extra to pay annually.
Total Budget Impact
Adding labour and business rates increases:
- Labour Cost Impact: £1,202,700.
- Business Rates Impact: £162,745.
>> Total Annual Cost Increase: £1,365,445.
Under the new Autumn Budget 2024, a 30-unit restaurant chain with 500 employees and an average annual business rate of £12,122 will face a staggering £1,365,445 in additional costs.
This sharp increase could dramatically affect profit margins and operational budgets.
Is your business ready for this?
How to Mitigate Rising Costs in Restaurants
There are plenty of ways to tackle rising costs. This is encouraging, but it also means there isn’t a single solution that can address every challenge at once. Nor does every strategy work for each type of restaurant business or concept.
Regardless of what works for your operation, you’ll find that protecting your margins requires several strategies working together. This process can be complex, especially if recent crises have already forced you to focus on the more obvious savings or quick wins.
With that in mind, cost-reducing strategies can be grouped into four key categories:
- Quick Wins: These are areas you’ve likely addressed but could probably do with a review.
- Underused Opportunities: These are steps you may have started but rarely are maximised.
- Overlooked actions: These are often missed opportunities that can make a big impact.
- Structural Changes: These are transformative changes that deeply affect your business and operations.
What actions fall under which category?
1. Quick Wins
This is the “low-hanging fruit”. They are straightforward actions that deliver immediate results and usually require minimal investment. Chances are, you’ve already implemented a few in response to recent challenges.
These tactics help stabilise operations and buy time during tough periods. However, they do have limitations. For instance, simplifying your menu can drive efficiencies, but over-streamlining risks compromising quality and customer satisfaction.
If you haven’t fully explored these strategies, now’s the time to do so. And if you have, regular reviews are essential to ensure they remain effective as circumstances evolve.
- Menu Price Adjustments
Normally, I wouldn’t categorise raising menu prices as a ‘quick win.’ However, during the inflation crisis, widespread news coverage and customer understanding made it a more acceptable strategy. Many restaurants implemented multiple modest, across-the-board price increases during that period.
This approach works as a survival tactic, but it is too simple to be a strong long-term strategy. Opportunities remain underused, and price elasticity has its limits. Customers will only accept so much before demand drops.
- Cost Control
Renegotiating with suppliers is a common starting point in controlling costs. Securing bulk discounts or better payment terms can lead to immediate savings. To make this work, restaurants need strong supplier relationships and a clear understanding of their purchasing volumes.
Standardisation is essential. Restaurants should streamline ingredient usage, portion sizes, and purchasing processes across all locations. When units buy from different suppliers or outside regular deliveries, they miss the volume needed to trigger discounts.
Utility audits are another effective tactic. Switching to cheaper energy providers or renegotiating contracts can lower overheads. But these savings won’t go far without broader steps, such as upgrading to energy-efficient equipment or tracking energy use more effectively.
Reducing food waste is one of the most impactful but often overlooked strategies. Portion control and waste-tracking tools help minimise losses and create sustained savings. When waste is well-managed, kitchens run more efficiently, and profit margins improve.
- Labour Management
Adjusting staff schedules is a simple way to lower labour costs. Aligning working hours with customer demand helps avoid overstaffing during quiet periods while ensuring full coverage during busy times. This balance improves efficiency and keeps payroll manageable.
Overtime is another area to address. It can drain your profit margins. Hiring part-time staff to cover scheduling gaps is a cost-effective solution. A flexible team is always ready to step in when needed.
Cross-training employees is an effective but often overlooked strategy. It delivers fast results and adds valuable flexibility to your team. Training staff to perform multiple roles reduces reliance on specific positions. It also prepares your team to handle unexpected challenges, like staff shortages or sudden spikes in demand.
- Menu Simplification
Focusing on fewer, high-margin items helps simplify operations without sacrificing quality. Menu engineering software can identify your best-performing dishes and flag underperformers that hurt profitability.
Reviewing your menu is also a great opportunity to improve ingredient use. Over time, menus can become inefficient as chefs add ingredients. This might lead to duplications, like stocking multiple types of olive oil or an overly long supplier list.
Menu software helps chefs design dishes that use shared ingredients from a smaller group of suppliers. This reduces inventory complexity, cuts waste, and lowers food costs by several percentage points.
- Automation
There are many ways to automate restaurant operations. Self-service kiosks are a practical option to cut front-of-house staffing costs while improving the ordering experience. These systems allow customers to place their orders directly, freeing up your team to focus on other tasks and reducing labour expenses.
Digital stock tracking takes the guesswork out of inventory management. With restaurant inventory software, you can monitor stock levels in real-time, preventing overordering and minimising waste. It’s an effortless way to maintain control and protect your margins.
Procurement optimisation is another area where automation shines. Restaurant procurement software suggests accurate purchases and allows staff to order from all suppliers in one place. This reduces costly manual errors, and demand forecasting ensures your stock is replenished with the right items at the right time.
It’s far less hassle for your restaurant teams, and the head office benefits from having all the data neatly organised in dashboards.
Review Frequency: Keep Optimisations On Track
To keep these strategies effective, schedule regular reviews based on their nature. Your review schedule could look something like this.
- Weekly or bi-weekly: Labour scheduling, waste monitoring.
- Monthly: Payroll analysis, inventory tracking.
- Quarterly: Cross-training, procurement reviews, menu performance.
- Annually: Supplier contracts, utilities audits, automation usage.
2. Underoptimised Areas
Many foodservice businesses have started implementing these strategies, but struggle to unlock their full potential. Common challenges include a lack of expertise, limited resources, short-term thinking, and resistance to change.
The upside is that it leaves much room to improve cost control and operational efficiency.
- Data utilisation
Data is one of the most overlooked resources. Sure, many businesses collect it, but they often lack restaurant analytics software to make sense of it.
Real-time tracking of performance and sales only gets partly done, leaving big gaps in the data restaurants need to truly understand how things are going. This means restaurants are missing chances to spot trends, determine what their customers want, or sort out inefficiencies.
- Revenue Growth Strategies
Revenue growth strategies follow a similar pattern. Encouraging staff to promote add-ons or combo deals significantly boosts sales. However, regular training and monitoring often get overlooked. Also, staff and managers can feel awkward about upselling, worried they might seem pushy. In reality, most customers appreciate it—if they see the deal as a clear benefit.
The same goes for tweaking prices based on demand, like raising them during busy times or offering discounts during slow periods. While dynamic pricing did stir up some debate, most of the backlash came from poor communication. Done right, it’s a great way for (some) businesses to grow revenue and even improve customer satisfaction.
- Employee Retention
High staff turnover is a major problem, costing the industry a fortune. Dutch bank ABN AMRO estimates these costs add up to around 6% of total revenue. This includes everything from training new hires to lost productivity.
Yet, retention strategies often focus on quick fixes instead of long-term solutions. While basic training is common, many businesses don’t provide clear career paths or leadership development programmes, which leaves staff feeling stuck and more likely to leave.
Non-monetary perks like flexible shifts, recognition programmes, or wellness initiatives are also hugely underused. These can be just as effective as pay raises in keeping employees happy and motivated.
3. Overlooked strategy
The most overlooked strategy is the digital strategy. Restaurants miss cost-saving opportunities because their systems and processes don’t work together. Without reliable data, any strategy to improve cost management seems impractical and overwhelming.
Without proper integration or reliable data, any strategy to optimise cost management is impractical and overwhelming.
Restaurants buy or build software for all sorts of reasons—because a problem needs fixing, to gain a competitive advantage or to close a functionality gap. But they rarely digitalise because it’s part of a long-term strategy.
As a result, restaurant chains digitise without any real structure. Some departments use advanced tools, while others rely on outdated spreadsheets. These disconnected systems create inefficiencies, errors, and waste time.
At the headquarters level, the lack of integration forces teams to spend days consolidating data to extract meaningful insights. Even then, decision-makers struggle to trust the data due to inconsistencies and possibly outdated information.
The impact is equally severe at the operational level.
For example:
- Ingredient cost changes might not automatically adjust recipe costings.
- Changes to menu prices may fail to sync across online platforms or delivery apps.
- For multi-site restaurants, this lack of integration leads to inconsistencies in pricing, inventory shortages, and procurement inefficiencies.
This makes tech integration (part of the digital strategy) the second most overlooked strategy. Integration and robust APIs ensure key systems—like POS, inventory, and BI tools can talk to each other and data is centralised. That way, all teams have access to the same up-to-date information.
If any strategy will reduce costs sustainably, it’s your digital strategy.
4. Structural and Business Opportunities
To run a successful restaurant business over the long haul, it’s worth looking at ways to streamline operations, grow efficiently, and keep customers coming back.
Here are some practical strategies:
- A central production kitchen can help keep food quality consistent, cut waste, and save on labour by prepping everything in one place. Centralising procurement—ordering supplies for all locations together—boosts buying power and ensures you’re getting what you need when you need it and at the best possible price. This makes day-to-day operations smoother and sets you up for steady growth.
- Franchising or licensing lets you grow your business without taking on all the running costs. You can focus on keeping the brand consistent and setting standards, making it easier to expand quickly while staying profitable. That said, running a franchise is completely different from running a restaurant. You’re essentially selling restaurants. Keep that in mind.
- Building sustainability practices into your operations makes a lot of sense. It’s what Kaj Török said in an interview on The Food Service Growth Show: “If you want to develop a brand for the ages, you have to build a company today that will thrive in the future. With that in mind, being sustainable is a no-brainer.”
Carbon tracking tools can show customers you’re serious about sustainability while helping you meet regulations. (Recommended video: How ESG Regulations Impact The Restaurant Industry).
- And finally, an omnichannel approach—combining dine-in, delivery, catering and online options such as virtual brands—makes your brand accessible wherever customers are. This strategy maximises production capacity by introducing new sales channels or optimising existing ones.
For more insights into the future of off-premise dining, explore this resource: How Will Off-Premise Dining In Europe Evolve?
Preparing for the Future
The Autumn Budget 2024 presents significant challenges for UK restaurant chains, but it also offers opportunities to innovate and become more resilient. By combining quick wins, data-driven strategies, and long-term structural changes, foodservice businesses can protect their margins and emerge stronger.Is your business prepared for these changes?
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