The British hospitality industry is standing on what one publican has described as a “financial cliff edge”, as rising employment costs, VAT and sharp increases in business rates push pubs and small operators to breaking point.
Speaking from the frontline, Lyn Mackenzie, landlady of two Weymouth pubs, has warned that the pressures now facing hospitality go far beyond the price of a pint — and threaten the long-term survival of community venues across the country.
Mackenzie, who runs The Black Dog and The Tin Cat through her company Your Local Ale House Ltd, says the combination of higher National Insurance, rising wages, full-rate VAT and soaring business rates has created conditions many pubs simply cannot withstand.
“This goes far beyond the price of a pint,” she said.
“Hospitality now has its back against a wall.”
Part-time work pushed to the brink
Around a third of Mackenzie’s 24-strong workforce is employed on part-time contracts of between 10 and 15 hours per week — a model she says is essential to hospitality, allowing businesses to flex staffing around busy and quiet periods.
But recent changes to employer National Insurance thresholds mean that once staff work beyond relatively low hour limits, employment costs rise sharply. Mackenzie describes this as a “financial cliff edge” for employers.
The result, she warns, is that part-time roles — relied upon by students, carers, people with second jobs and those supplementing benefits — are becoming increasingly unviable.
“Rather than increasing economic security, it risks reducing employment opportunities and workforce participation,” she said.
Wage rises without support
While Mackenzie supports the principle behind increases to the National Living Wage, she says they are being introduced without meaningful support for employers.
Higher wages, rising National Insurance costs and VAT on food, drink and soft drinks are forcing many businesses to flatten pay structures, reduce hours or cut staffing levels just to remain compliant.
“That undermines morale, retention and progression within the sector,” she said.
Business rates rising by up to 90%
Business rates are described as the most immediate threat. One of Mackenzie’s pubs is facing a 25% increase, while the other is seeing a 52% rise. Nearby hospitality businesses, she says, are reportedly dealing with hikes of between 71% and 91%.
She argues the rises appear arbitrary, lack transparency and bear little relation to a business’s ability to pay.
Across both pubs, Mackenzie estimates an additional £5,000 to £10,000 per month is now needed simply to cover increased National Insurance, VAT and rates.
“There is no realistic source for this income,” she said.
“Customers do not have the disposable income to absorb continual price rises.”
Pubs at a disadvantage to supermarkets
Mackenzie also points to what she sees as a structural imbalance between pubs and large retailers.
Hospitality venues must charge VAT on most food and drink sales, employ trained staff, meet licensing conditions and promote responsible drinking. Supermarkets, meanwhile, can sell alcohol at discounted prices without the same obligations.
“This creates an uneven and unsustainable competitive environment,” she said.
Live music under threat
Live entertainment is another casualty of shrinking margins. Mackenzie explains that live music is funded from profits and is not treated as a deductible operating expense.
As costs rise, entertainment is often the first thing to be cut — despite its wider value to local economies.
In towns like Weymouth, live music supports musicians, venues, accommodation providers and tourism businesses.
“If live music disappears, the damage will ripple through the entire local economy.”
A call for urgent action
Mackenzie is urging government and local authorities to act quickly, warning that without intervention the likely outcomes include closures, job losses, hollowed-out high streets and reduced tax revenues.
Her calls include:
- Meaningful reform of business rates, including caps on increases
- A review of employer National Insurance thresholds for part-time staff
- Targeted support to fund statutory wage increases
- A reduction in VAT for hospitality
- Fairer taxation compared with large retailers
- Formal recognition of live entertainment as an economic contributor
“Without urgent action,” she said, “we risk losing not just pubs, but the social and cultural spaces that hold communities together.”
She added simply:
“Long live the British pub.”
