Pressure on costs and consumers could hurt, but smart strategy can turn risk into renewal.
Rachel Reeves’ first full Autumn Budget in November 2026 will be delivered against one of the most complex backdrops the hospitality and cultural sectors have faced in decades. High borrowing costs and limited fiscal headroom mean Reeves will prioritise fiscal discipline, while still needing to demonstrate growth. The likely result is a package of targeted tax reforms, otherwise known as tax increases, tighter employer obligations, and cautious investment in infrastructure — measures that, while sensible on paper, risk hitting hospitality, retail, leisure and cultural venues hard.
Tax and cost pressures
Business rates reform is expected to tilt towards some relief for smaller operators while increasing the burden on large properties with higher rateable values. That means major hotels, leisure complexes and large cultural institutions may see costs rise, even as smaller cafés or independents gain some respite. Alongside this, employer National Insurance contributions are set to climb, and thresholds frozen, pulling more workers into the net and driving up labour costs in a sector already reliant on low-margin, high-volume staffing. Pension and property tax reliefs are also under review, creating further uncertainty.
The consumer squeeze
Even if macro indicators suggest inflation is easing, the reality for households is different. Energy bills are forecast to rise again this winter, food prices remain elevated, and shrinkflation erodes trust in value. After years of cumulative increases, disposable income is structurally lower. Eating out, visiting attractions, or booking weekends away are precisely the categories families cut first. For hospitality, this means softer demand at the very moment operators face higher costs.
The false promise of “value engineering”
Faced with these pressures, many institutions and contractors will turn to “value engineering” expecting operators to deliver more for less. But hospitality doesn’t bend that way. Our own museum analysis shows how this plays out: menus stripped of creativity, kitchens reliant on pre-pack, cheap furniture in historic rooms, tables crammed too tightly for conversation. Service slows as fewer staff cover more ground, morale and retention drops, and visitor satisfaction deteriorates. The short-term “savings” undermine the very experience people are willing to pay for. In a climate where consumers are going out less often, they demand quality and authenticity when they do. Cut too far, and you give them no reason to return.
Strategic risks and opportunities
For Reeves, the danger is assuming hospitality can simply absorb these fiscal adjustments while still functioning as a driver of growth, jobs and regeneration. In reality, the combination of higher taxes, rising energy costs, and squeezed consumer budgets could accelerate closures, particularly among mid-sized operators and regional cultural venues. The education sector already reeling with VAT will struggle even more.
Yet there is also opportunity. Planning reforms and targeted infrastructure investment could support tourism flows and new developments. Institutions that reframe their food and beverage offers as integral to their mission, rather than bolt-on profit centres, can create distinctiveness that draws repeat visits. In today’s climate, “value” is not about being the cheapest; it is about offering meaning, connection, and experiences worth paying for.
Conclusion: a moment for reinvention
The November 2026 Budget will test the sector’s resilience. Success will lie not in cutting corners, but in doubling down on quality, integration, and the understanding that hospitality is not a cost centre but a strategic asset. For consultancies and advisors, this is also a moment of real opportunity: organisations will be actively searching for ways to retain profitability, reinvent offers, and reconnect with their audiences. With the right guidance, the sector can emerge not just leaner, but smarter — positioning hospitality as central to cultural and commercial recovery.