Reeves’ tax hikes lead to spike in pubs going bust
The series of tax hikes introduced by Chancellor Rachel Reeves in her Autumn Budget last year has contributed to a spike in pubs going bust across the UK in April, according to new figures.
A total of 67 pubs closed down during the month – the highest number since July 2024 when 75 entered insolvency – accountancy firm Price Bailey has said.
UKHospitality said the increase to employer’s National Insurance contributions, plus a higher National Minimum Wage, increased the cost of full-time employment by at least £2,500 per person.
Both hikes were announced by Reeves in her first Budget in October last year and came into effect in April.
The hospitality sector, which employs 3.5m people, has been particularly hard hit as it relies on part-time and minimum wage workers.
“The early signs are that the tax and minimum wage hikes which took effect in April are already tipping some struggling pubs over the edge,” head of insolvency at Price Bailey, Matt Howard, said.
“Many pubs had already exhausted their financial buffers… One in five pubs are technically insolvent,” he added.
“It’s clear that economic warning signs are flashing and the impact of April’s cost increases are having exactly the impact that was predicted,” Kate Nicholls, the new chair of UKHospitality, said.
One in five UK pubs ‘technically insolvent’
Price Bailey found that 21 per cent of pubs are technically insolvent – meaning they have negative net assets on their balance sheets, making them highly vulnerable to going bust.
“One in five pubs are technically insolvent, and while it is possible to keep trading and salvage the situation, being hit with sharp payroll and energy price rises will prove too much for many of them,” Howard said.
It’s largely small independent pubs which have been particularly suffering, with chain pubs and experiential leisure venues posting improved trading in 2025.
Fuller’s, for example, said like-for-like sales at its pubs rose by 4.2 per cent in the first 10 weeks of the year.
JD Wetherspoon, Marston’s and Young’s have also managed to fend off the costs crisis so far, relying on better trading and technology-led improvements in labour.
For small, financially insecure pubs, however, the increase in costs has created a doom-loop where they have to restrict opening hours to stay afloat.
“Many are having to sacrifice long term customer relationships on the altar of profitability as they focus on the busiest hours,” Howard said.
Reeves tax hikes ‘indefensible’
New figures from the British Beer and Pub Association (BBPA) have also shown that tax increases and the rise in the Minimum Wage have cost each UK pub about £14,000 on average.
The impact of rises in National Insurance contributions, the National Minimum Wage, business rates for some companies and packaging taxes have wiped out the equivalent of 12 days of pubs’ turnover, the BBPA said.
Emma McClarkin, boss of the trade body, said the hit was “indefensible” and called for immediate action to help support the future of the sector.
It has urged the government to overhaul the current business rates system of property tax in order to help offset recent cost increases.
The Labour government has said it plans to reform the current business rates system, and in March said it will publish an interim report on this during the summer.
However, in April’s Spring Statement, the government cut a relief on the property tax – that came in following the Covid pandemic – from 75 per cent to 40 per cent, resulting in significantly higher bills for hospitality, retail and leisure businesses.
The BPPA has called on the government to speed up reforms of the commercial property tax to alleviate pressure on pubs.
The organisation warned earlier this year that the average price of a pint of beer would surge past £5 for the first time because of the cost hikes hitting the sector.
It said the average cost of a pint in the UK was expected to rise by about 21p as a result as pubs are forced to pass some cost inflation onto customers.
Ms McClarkin, chief executive of the BBPA, said: “Pubs are effectively having to run on empty for nearly a fortnight which is indefensible considering how vital they are to communities, livelihoods, and the economy.
“We support Labour’s ambitions to unlock the UK’s potential but, to do that, they must make practical, meaningful changes that support pubs and the jobs that rely on them.
“We are not asking for special treatment — we ask only for fairness.
“We want a modernised, business rates system that supports, not punishes, pubs; Government to mitigate employment cost rises; and a review of the nonsensical and unfair EPR (extended producer responsibility) system.”