Following the Chancellor’s recent budget, businesses in the hospitality sector will need to prepare as best they possibly can for the changes announced, many of which come into effect from April 2025.
The rise to the National Minimum Wage, the increase in employer’s National Insurance contributions and the reduction in Business Rates Relief, will be particularly challenging for the sector.
These changes are going to further disrupt the cashflow and profitability of hospitality, leisure and tourism businesses.
This follows a period which has already seen a multitude of cost rises, which has resulted in business previously having to increase their prices to even attempt to maintain profitability. Whilst business will need to once again revisit their pricing strategies, they are not always going to be able to pass on the entirety of their cost increases to their customers.
This means businesses will need to find other ways of becoming more efficient.
How can businesses prepare?
There is nothing that businesses can do to completely avoid the impact of the changes on the horizon, however there are various actions that can be taken to plan for the changes and to help ease the impact they have.
Whilst budgeting and cashflow forecasting is always a key tool for any business, it is even more crucial during periods of substantial change. Businesses should be updating and reviewing their forecasts to understand the impact of the UK budget changes.
The reduction in business rates relief announced means there is never a better time to review your business rates and rateable value. It is crucial that all businesses in the sector check this to ensure that they are not being overcharged in error. If you believe you are being incorrectly assessed then you can submit a Rateable Value Appeal.
By offering salary sacrifice options to your employees, such as pension contributions, the leasing of a car, or buying a bicycle, you can save Employer’s National Insurance on the amount sacrificed. (Note: this option may not be applicable to all employees). More on salary sacrifice, read here.
With energy prices still high, it may be worth considering investing in energy efficiency and renewable energy sources. Many businesses are already doing this and seeing substantial ongoing cost savings as a result. There are also specific tax advantages for investment in renewable energy.
Ensure that your business is harnessing all available technology. Implementing technology solutions to streamline operations and reduce costs can enhance efficiency. This can be anything from automation of your accounting software, to your booking and revenue management system. Any time or cost savings that can be made through technology will be key to maintaining profitability moving forward.
Investing in staff training and development where possible could be a valuable initiative to improve service quality and operational efficiency across the business. This could result in both cost savings, and increased revenue due to customer satisfaction.
Whilst the budget was not good news for the sector, hopefully the points above highlight some of the areas you may wish to explore to help streamline your business in advance of the additional cost burdens arriving in April 2025.
If you would like to discuss how the announcements from the Autumn Budget impact your hospitality business, please get in touch. Call 0808144 5575 or email help@armstrongwatson.co.uk.
