Premier Inn owner Whitbread expects to save up to £60 million on business rates by 2029 after the Government unveiled Budget measures to ease pressure on Britain’s hospitality sector, offering a significant boost to the hotel group amid rising labour costs and mounting concerns over the cost of doing business.
The FTSE-listed group said the Chancellor’s decision to freeze qualifying retail and hospitality property taxes in real terms for two years would have a “significant” positive financial impact, substantially reducing its expected exposure to higher business rates.
Whitbread’s business rates bill is now forecast to rise by between £7.5 million and £12.5 million in 2027-28, compared with previous expectations of an increase of around £35 million. A similar annual increase is anticipated in the following year.
As a result, the company expects its rates payments to be between £45 million and £60 million lower by 2028-29 than previously forecast, providing relief as hospitality operators grapple with higher wages and persistent cost pressures.
Dominic Paul, Whitbread’s chief executive, welcomed the measures, saying the Budget’s business rates changes would help mitigate the effects of previous fiscal decisions on the sector.
“The business rate measures announced in the UK Budget will do much to mitigate the damaging impact of the past two budgets on the hospitality sector, and we are grateful that the Government has listened to our concerns,” he said.
He added that limiting business rates increases to inflation over the next two years, alongside a more moderate increase in the national living wage and national minimum wage, would make a “significant difference” to the business.
Budget relief offers respite for Britain’s high streets
The intervention forms part of a broader Government effort to support Britain’s struggling high streets and hospitality businesses, with the cost of relief partly offset by higher taxes on gambling operators and measures targeting online sales.
The Budget raised the threshold for 100% small business rates relief for eligible retail and hospitality properties from £12,000 to £18,000, while the threshold for tapered relief increased from £15,000 to £21,000.
Qualifying properties in England will also benefit from a real-terms freeze in business rates bills during 2027-28 and 2028-29.
The measures offer some relief to a sector facing pressure from rising employment costs. The national minimum wage is set to increase by 3.9%, although the Government opted against a larger increase for younger workers amid concerns about unemployment among under-21s.
For hotel and restaurant operators, the balance between wage increases, property taxes and consumer spending remains critical to profitability.
Gambling tax rises help fund hospitality support
Gambling companies will bear part of the cost of the package. From April next year, duty on machine games with stakes above £1 will rise from 20% to 25% — a smaller increase than some operators had feared before the Budget.
However, the additional levy will still weigh on industry earnings. Rank Group, owner of Mecca Bingo, said the change would cost it approximately £9 million annually, including around £2 million in the financial year ending June 2027.
Entain, which owns Ladbrokes and Coral, described the measure as “another disappointing decision” and warned it would add approximately £25 million to its annual costs.
Shares in gambling companies initially rallied after the Budget delivered a less severe tax increase than anticipated, before surrendering some gains as investors assessed the financial impact.
For Whitbread, the business rates changes provide a clearer near-term cost outlook. But while the projected savings represent a material boost, the wider challenge for Britain’s hospitality industry remains whether tax relief can offset rising operating costs without undermining investment, employment or consumer demand.
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