As we expected, the Chancellor’s Spring Statement brought few surprises for the Hospitality & Leisure sector. Hopes that measures announced in the Autumn Statement, such as the rise in employers’ National Insurance, would be reversed, were dashed. Instead, the main focus was on public spending cuts and injections of funding into other sectors.
Last week’s Spring Statement highlighted businesses may endure a potentially turbulent time in the upcoming years with adjustments to forecasts on growth and inflation.
Inflation / Growth
The OBR predicts inflation is expected to stabilise at 2% per annum from 2027 onwards which is good news for the sector. They also predict a rise on the average inflation to 3.2% next year before it begins to fall.
The OBR have downgraded the UK’s 2025 growth forecast from 2% to 1%. More positively, they have forecast growth to hit 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029. In the meantime, the OBR predicts households will have an extra annual £500 of disposable income which is unlikely to significantly benefit the sector!
The fluctuations of inflation and growth predictions indicate a turbulent time ahead for the sector.
The Labour Government have confirmed their backing for a third runway at Heathrow Airport which will be welcome to the travel and tourism industry.
Taxes
No new tax rises were announced in the Spring Statement which would have been welcomed by the Hospitality & Leisure sector. Rachel Reeves announced she’ll raise an extra billion pounds in taxes by cracking down on tax evasion.
The rise in business rates from next month will continue to go ahead which will see an increased cost to businesses in the industry.
Staff costs is one of the highest costs for the H&L sector and a U-turn on increases to National Insurance would have been welcomed as well as inheritance tax, however no announcements were made.
The Income Tax and National Insurance thresholds will remain frozen and therefore individuals will continue to see a high tax burden.
Menzies have published a Spring Forecast Hub. Access it here
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