After months of leaks, briefings and damaging uncertainty, the Chancellor has finally delivered a 2025 Autumn Budget that by common consent lacks any meaningful growth strategy and will raise some £26 billon in extra taxes, most of which will come out of the pockets of the consumers whose spending drives the UK economy.

For those sectors that depend on consumer confidence, such as retail, hospitality and leisure there are some very small crumbs of comfort, but some far more threatening and stark realities:

• The Office for Budget Responsibility calculates that disposable incomes will rise by 0.5% in 2025/26 but then by only 0.25% a year until 2029/30. The long-term average rise until now has been 1%.
• One in four workers will be paying the higher rate of 40% tax by 2030.
• More than 1.7 million workers will be dragged by ‘fiscal creep’ into either paying tax for the first time or be pushed into a higher band.
• The tax take as a percentage of GDP will be 38% by the end of the current Parliament, the highest ever burden.
• GDP growth will average 1.5% over the next five years, compared to the long-term average of 2.3%.
• Labour costs will rise sharply following the latest increase in the National Minimum Wage (NMW).
• Changes to Corporation Tax reliefs for some capital expenditure will complicate the investments crucial to maintaining and improving customer experience.

The key sectors are all affected in different ways, but with some common themes:

Retail

The good news was the ending of uncertainty on the business rates relief for smaller premises now that this has been made permanent, but there is concern at the inclusion of larger supermarkets and stores in the new surtax for properties with a rateable value of more than £500k, even if the additional charge will be less than originally thought.

Unfortunately, any net benefit on business rates is dwarfed by the rise in the NMW, especially for employees aged 18 to 20 where the hourly rate from April 2026 will be 26% higher than it was in April 2024. This is on top of the 2% rise in employers’ National Insurance (NI) contributions and fall in the NI threshold which came into force last April.

Retailers had been asking for a lower rate of VAT, as well as calls for the reinstatement of the VAT exemption for foreign visitors to eliminate the so-called tourist tax.  These pleas have been ignored.

The Chancellor did close the custom duty relief loophole that allows small packages worth less than £135 into the UK without being charged import duties. This should curb the flow of cheap goods flooding the market, but there will need to be careful planning to avoid this creating friction at UK border. The annual value of imports through this route has soared to £5.9bn, but unfortunately this change won’t occur until March 2029.

In another important change, from January 2026 there will be a new tax relief at 40% on investment in new ‘plant and machinery’, but the standard tax relief on other capex will fall from 18% to 14%. Whatever the net effect, this will surely complicate retailers’ investment plans, but it will also be a bonanza for accountants and tax advisors helping them navigate the new regime.

The trade body, the British Retail Consortium summed up the industry’s reaction: “we will see winners and losers across retail and the impact for consumers will unfold in the coming months, but this Budget does not go far enough to mitigate the inflationary pressures already bearing down on the industry.”

Hospitality

As with retailers, hospitality operators will face sharply increased labour costs and uncertainty on tax reliefs for business investment, as well as feeling the denial of a lower VAT rate for the sector. In addition, they will be disappointed that the Chancellor is going ahead with raising alcohol duty by RPI from next April.

On Business Rates, the trade body UK Hospitality has particular worries about cost rises from April 2026 caused by the application of new rateable values. It calculates that the likely increases will be 76% for accommodation businesses, 30% for pubs and 14% for cafes and restaurants.

Leisure

The leisure sector’s principal concern lies with the new arrangements for Business Rates, but is also worried about increased labour costs. The Sport and Recreation Alliance has expressed its disappointment that its venues have not been exempted from the larger premises surtax. UK Active has highlighted the labour cost issue. The Meetings Industry Association is asking for urgent clarification that its event venues come within the Retail, Hospitality and Leisure (RHL) definition for inclusion in rate reduction reliefs under the revised Business Rates regime.

Business failure risks

The new challenges introduced by the Budget facing these key industries must heighten the possibility that insolvencies will increase in the near and medium terms. RHL businesses already make up more than a quarter of all UK business failures, a figure that could rise, especially in the first few months of 2026 if this year’s festive season is a disappointment because of consumer caution.

Industry consolidation

Apart from the increased failure risk, there is likely to be a surge in merger and acquisition activity across the RHL spectrum as stronger operators take advantage of opportunities to add competitors weakened by the Budget measures to their portfolios.  This process has been particularly noticeable so far this year in the pub sector, as exemplified by The Restaurant Group and Upham Inns acquiring significant parts of Oakman Group. The trend will almost certainly accelerate as we move into 2026.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners who can discuss options with you. We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.