HU MEMBERSHIP UPDATE RISING COSTS AND ECONOMIC CHALLENGES FOR HOSPITALITY BUSINESSES
12 May 2025
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Rising Costs and Economic Challenges for Hospitality Businesses
The recently published Ulster University Economic Policy Centre (UUEPC) report, supports our position that hospitality businesses are under severe economic pressure, detailing the significant economic challenges that are likely to impact your business in the coming months.
The Report Identified the Key Challenges:
- Increased Employer NICs and National Living Wage:
- Employer NIC rates rise from 13.8% to 15%, with thresholds lowered significantly from £9,100 to £5,000 per annum starting April 2025.
- A typical hospitality business employing around 40 full and part-time staff could see annual labour costs increase by approximately £25,000 due to NIC changes alone, rising to approximately £73,000 with wage increases included.
- VAT Disadvantage:
- NI hospitality businesses remain at a significant competitive disadvantage due to VAT set at 20%, compared with just 13.5% in the Republic of Ireland (RoI), possibly reducing further to 9% for food-related services.
- Example: A large hotel in RoI benefits from an annual VAT saving of up to £545,000, enhancing their ability to invest and attract more customers, impacting border-region competitiveness.
- Energy and Operating Costs:
- Energy costs remain significantly higher than pre-2021 levels, particularly affecting our energy-intensive hospitality sector.
- Combined with rising insurance premiums, these costs further reduce already thin profit margins.
- Sector Responses and Impact:
- Businesses may need to raise prices (52%), reduce investment (22%), and limit operating hours, affecting the overall tourism product and economic stability.
Next Steps
This independent report gives voice to the case we have consistently made on behalf of the sector. Government can no longer ignore the facts.
We are engaging with the Minister for Finance to call for action on the back of the report his department commissioned.
We know the NI Budget is in a bad way and money is tight, but we cannot sit by and watch our hospitality businesses being crippled and lost for the lack of support.
For our pubs, there must be action on business rates which are disproportionately impacting their viability. We’ve seen almost half a million pounds spend on a Licensing and the Surrender Principal report that highlights the loss of pubs, suggesting we need more licenses issued, rather than identifying the cost pressures that are closing them down and how they can be saved.
For our restaurants, food pubs and hotels, a cut in VAT would be a game changer, not only for survival but would also drive investment. To this end, we are calling on the Minister to join with the industry in a coalition and take our battle to Westminster to meet with the Treasury and with the evidence demand urgent intervention.
But we need your help: please complete the current trading survey
https://mailchi.mp/hospitalityulster/quarterlysurveymay25
Also, if your business has lost trade to the south due to VAT, please share your case with us. alena.orr@hospitalityulster.org
Together, let’s ensure this report is a turning point—not just more evidence on the shelf.