Budget response: Scottish Hospitality and Tourism Leaders Warn of Deepening Crisis as Wage Hikes and Lack of Rates Relief Hit Sector

Hospitality, tourism and night-time economy leaders are warning that Scotland is on the brink of becoming the hardest place in the UK to run a hospitality business. Steep wage increases, rising costs, and the absence of business rates relief from Holyrood are pushing the sector to a breaking point.

The UK Chancellor’s Autumn Statement delivered the lowest business rates for hospitality in England in over 30 years, leaving Scottish operators at a growing competitive disadvantage. Businesses north of the border face the same inflationary pressures and rising costs as their English counterparts – but no relief. With £830 million in Barnett consequentials just announced, it is up to the Scottish Government to act decisively: reduce rates, support wages, and protect jobs.

Concerns focus on National Minimum Wage increases – especially for 18–20-year-olds, who make up a large share of Scotland’s hospitality workforce. Operators warn that without action, many will have to cut hours, restrict hiring, or even close entirely.

Marc Crothall MBE, Chief Executive of the Scottish Tourism Alliance, called the UK Budget “a major setback” and stressed the urgent need for Scottish Government intervention. He said, “The sector needed a Budget that reduced the cost of employment, strengthened consumer confidence and supported recovery. Instead, today’s measures risk making an already difficult outlook even more precarious. With business rates being reduced in England, the Scottish Government must use the Barnett consequentials to ensure our businesses can compete and survive.”

Donald Macleod MBE, owner of Glasgow’s Garage and Cat House late night venues, commented, “I’m deeply disappointed that the Chancellor failed to introduce a reduced VAT rate for hospitality, bringing it in line with other European countries. Equally, I had hoped she would reverse her disastrous, business-busting Employers’ NI policy. Alongside above-inflation rises to minimum and living wages, this has significantly increased contributions, resulting in over 100,000 job losses, hundreds of closures, higher prices, and reduced investment.

“I welcome the measures south of the border, where a package of business rates reforms will permanently lower rates for hospitality operators. I can only hope the Scottish Government follows suit, though given their past reluctance to grant rates relief, I fear it may never happen. I am also concerned that further above-inflation increases to minimum and living wages will push many struggling operators to raise prices again just to meet their wage bills.

“This was not a budget for business growth. It was a budget designed to placate backbenchers with hikes in welfare payments – a budget seemingly aimed at saving the political skins of Rachel Reeves and Sir Keir Starmer, rather than supporting the hospitality sector or wider enterprise.”

Michael Bergson of the Buck Bar Group added, “Last budget’s employer tax increases were a total disaster. It’s astonishing that they haven’t been reversed, especially as they’ve contributed to soaring unemployment at a time when technology is threatening one in six jobs.”

“The UK Government has missed a clear opportunity by ignoring calls to cut VAT by half, which would bring us in line with many European countries and provide real relief to businesses.”

“Will Scottish hospitality benefit from some of the £830 million? We’ll have to wait and see.

“Minimum wage increases? Every penny is shouldered by businesses. If the government genuinely wanted to put more money in workers’ pockets, they’d reduce the taxes deducted from wages. Minimum wage workers currently pay 20% on their earnings—that’s excessive. Aligning tax reductions with any minimum wage rises would genuinely stimulate the economy and help curb inflation.”

While the increase in alcohol duty will also not help. Paul Kopec, CEO of whisky investment firm Speyside Capital, said, “Today’s decision to increase the duty on alcohol once again is undoubtedly a serious mistake that will place further pressure on the UK’s whisky sector and the wider hospitality economy.”

Ash Corbett-Collins, CAMRA Chairman commenting on the Budget said, “This is a dark day for UK drinkers, pubs and breweries. Instead of offering a bold package to save and support the UK’s pubs, the Chancellor has chosen not to help with VAT, energy bills or Employer National Insurance contributions. Pubs and breweries can contribute to economic growth but only with proper support from the Government on sky-high costs which are making it impossible for many pubs to survive and thrive.”

He continued, ““We are bitterly disappointed that alcohol duty has been hiked today. Instead of delivering a substantial cut in tax breweries pay on their beer going to be sold in pubs, the Chancellor has made the damaging choice to hike alcohol duties, including on draught beer and cider. As well as a cut in VAT and help with energy costs and Employer National Insurance contributions, Rachel Reeves should have taken action to recognise the benefits of drinking in community locals by slashing tax specifically on pints in pubs by up to 50% to help them compete with cheap supermarket alcohol. This extra hike in taxes on drinking in the pub can only risk more pubs and breweries being lost to the communities they serve.”

The Scottish Beer & Pub Association (SBPA) President Andrew Lawrence said, “This budget does very little to help Scotland’s pubs or brewers. The increase in beer duty will hit consumers directly, while the rise in the NMW will mean an extra bill of £25m for pubs.

“The sector is already struggling under the strain of high taxes, cost increases, and the cost-of-living crisis impacting on consumer spending habits.