Retail and Hospitality Sector

Lord Northbrook Excerpts

Thursday 22nd January 2026 Lords Chamber

[Lord Northbrook (Con)]

My Lords, I will start my speech with the special crisis that pubs face, outlined with figures from the British Beer & Pub Association. In addition to the business rates problem to which I will refer later, pubs face multiple policy changes that will affect sector costs. First, there is the issue of wage increases, putting pressure on pubs’ margins. The national living wage rose by 7% in 2025 and is going up by 4.1% in April 2026. The national minimum wage rose by up to 18% in April 2025 and is forecast to rise between 6% and 8.5% for 16 to 20 year-olds in 2026.

Then there has been the effect of increased national insurance. The threshold for employer NI decreased from £9,100 to £5,000 and the rate of employer NI increased in April 2025 from 13.8% to 15%. In addition, there are the problems of the change of rules for packaging recovery notes, shifting the full cost burden on to brewers; the regulatory burdens and uncertainty from the newly introduced extended producer responsibility; the deposit return scheme, which I will discuss later; and, of course, the reduction of the legal alcohol limit, especially affecting rural pubs.

The trade body UKHospitality’s key message is that the 2025 Budget did not deliver needed changes, such as a rebalancing of the business rates system, easement of employment costs or a reduction in VAT. Rather, there was minimal rates relief, steep hikes in rateable values—wiping out the 5p business rate discounts for hospitality—as well as wage increases and holiday tax proposals. Rising costs and taxes add further pressures on business, resulting in job losses and closures. Sector job losses since the 2024 Budget have reached 100,000, and without immediate action this will continue leading to reduced investment, further hollowing out of high streets and fewer opportunities for young people, the group most dependent on hospitality for employment.

Let us look at the business rates problem in more detail. The 5p discount for retail, hospitality and leisure businesses is far below the 20p relief allowed under legislation, and the benefit is outweighed by steep rateable value increases. Hospitality faces far steeper multiyear increases in rates bills than supermarkets, warehouses, offices or banks, directly contradicting the Government’s manifesto commitment to levelling the playing field between high street businesses and online giants.

UKHospitality estimates that business rate rises will cost small hospitality business £318 million. An average pub’s rates bill will rise 15% in year 1, reaching 76% over three years. A four-star hotel’s rates bill will rise 30% in year 1, reaching 115% over three years. In comparison, online companies’ warehouse rates will rise by only 9% in year 1 and 16% over three years. In contrast, large supermarkets will see rates fall by 2% in year 1 and rise by only 4% by year 3.

According to the Association of Convenience Stores, local shops are facing significant increases in business rates as a result of the 2026 revaluation and withdrawal of reliefs. While the ACS states that the introduction of lower multipliers for retail businesses was welcome, these changes do not go far enough. The multiplier needs to be set at a materially lower level to properly offset these increases and protect local shops. Transitional relief will only delay the impact of higher bills; it does not remove it. Even when increases are capped, many retailers are facing rises of several thousand pounds in April, with full effect pushed further into the parliamentary term rather than resolved.

Independent retailers, particularly those operating on petrol forecourts, are set to be hardest hit. These businesses benefited proportionately more from reliefs that are now being withdrawn and face sharp increases, despite the new retail, hospitality and leisure multiplier and transitional release package. These higher business rates costs directly affect the retailers’ ability to invest in stores, retain staff and continue to provide essential community services. Without further support, higher business rates risk undermining jobs, investment and the long-term viability of local shops that communities rely on every day.

Listening to the Minister’s response to the repeat of the Commons Urgent Question on Tuesday, I got no indication of a rapid response to the business rates problems for these businesses. I emphasise to the Minister here today the urgency of the situation. With his rare business experience among the Labour Front Bench, he must realise that remedial action is needed as soon as possible.