Wages increases push hospitality to its limit

The government has announced that from April 2026 the National Living Wage will increase to £12.71, an increase of 4.1%.

The wage rate for 18- to 20-year-olds will increase to £10.85, a higher-than-expected increase of 8.5%.

In total, the wage increases represent a total £1.4bn in additional cost for hospitality businesses, according to UKHopsitality. 

The trade body has expressed deep concern that such steep rises will further strain businesses already burdened by high taxation and operating costs.

It says the additional costs underline the urgent need for business rates reform in full. Ahead of the Budget (26 November) it is calling for the government to implement the maximum possible business rates discount for all hospitality properties with a rateable value below £500,000, and to ensure that no penalty charge is applied to any hospitality venue above that threshold.

UKHospitality also warned that the higher increase in youth wage rates will place additional pressure on youth employment. This comes just days after ONS data revealed that almost a million young people are not in employment, education or training.

Hospitality has reached its limit

"Increases to minimum wage rates are yet another cost for hospitality businesses to balance, at a time when they are already being taxed out," says Kate Nicholls, chair of UKHospitality (pictured). "These additional costs make action at the Budget to reduce hospitality’s tax burden even more important, especially if businesses are expected to sustain this level of annual wage increase.

"Hospitality businesses have reached their limit of absorbing seemingly endless additional costs. They will simply all be passed through to the consumer, ultimately fuelling inflation. We need to see the maximum possible business rates discount for all eligible hospitality properties and no hospitality venue hit by the surcharge.”

Nicholls also expressed concern about the impact of higher youth wage rates.

“The higher-than-expected increase to the rates for under-21s is worrying for hospitality businesses, who had hoped the government would take a more pragmatic approach to achieving its goal of equalising all wage rates. Hospitality is a sector that offers opportunities for all, regardless of experience or background, and is uniquely placed to help tackle youth unemployment. This should be embraced and supported, rather than discouraged.”

You may also be interested in…