- Hospitality is a major national employer, directly contributing around £93 billion a year to the economy and employing roughly 3.5 million people
- Businesses told Prosper UK that rising employment costs, energy bills, taxation and regulation are squeezing already thin margins
- Prosper UK heard directly from hospitality businesses and experts in Birmingham on the practical reforms needed to support growth
Hospitality is at the heart of the everyday economy, but also one of the sectors that has been hit hardest by the economic pressures of recent years. Across the United Kingdom, the industry directly contributes around £93 billion a year to the economy, employs roughly 3.5 million people, and is the country’s third largest employer, with around 99% of businesses in the sector being small or medium-sized enterprises. The Office for National Statistics estimated the value of the sector to the UK economy at £69.5 billion in 2023.
It is an industry that reaches into every high street and town centre, and one that provides a first job and a route into work for hundreds of thousands of people each year. Yet it is also an industry now under significant strain. Businesses report that the cost of employing people has risen sharply, energy prices remain high, and the cumulative weight of taxation and regulation is squeezing venues already operating with thin margins.
This is felt acutely in Birmingham and the wider West Midlands, a region with an ambitious hospitality and events sector, but one that now finds itself under growing pressure. Industry figures suggest that around two hospitality venues were closing every day during the first half of 2025, and that the sector lost tens of thousands of jobs in the months following the April 2025 Budget.
Prosper UK’s founding mission has been to take the conversation out of Westminster, listening to voters and businesses across the country and turning their ideas into practical, credible policy as we make the case for a pragmatic, pro-growth approach. On 16th March, we were in Birmingham, speaking to businesses and representatives from across the West Midlands hospitality industry to listen to the challenges they face.
This report sets out the ideas and solutions they identified. This is not necessarily the full picture, but it will play an important role in informing Prosper UK’s mission to develop evidence-based policy to support a sector that is vital to the West Midlands and to the country as a whole.
Recommendations from hospitality businesses in Birmingham
- Reduce the cost of employment, particularly the combined impact of the National Insurance changes and the National Living Wage, so that businesses can afford to recruit and train entry-level staff again
- Recognise and protect the training role of hospitality, ensuring that support for skills reaches the businesses doing the training rather than being absorbed by taxation
- Introduce a lower, permanent rate of VAT for hospitality, bringing the UK closer to comparable European economies and supporting the survival of viable businesses
- Reform the VAT registration threshold so that it no longer discourages small businesses from opening more often, expanding and taking on staff
- Address the disproportionate impact of energy costs on hospitality, and ensure the sector is not left at the end of the line as costs are passed down
- Redesign specific regulations, including Extended Producer Responsibility for packaging and the alcohol duty system, so that costs fall fairly and do not land on hospitality by default
- Support the take-up of no-and-low-alcohol products, including through a clearer labelling regime
- Reform the interaction between work and Universal Credit so that staff are not deterred from working additional hours
- Provide stronger, more strategic regional support for events, making the most of Birmingham’s international brand and major fixtures such as the 2026 European Athletics Championships
- Restore investment confidence in the city’s events programme and consider greater fiscal devolution so that targeted decisions can be made closer to the businesses affected
- Improve the quality of data on hospitality and the night-time economy, so that policy is based on an accurate picture of the sector’s costs, value and social contribution
Read the full report
Download Prosper UK’s West Midlands hospitality report: Supporting Hospitality Growth in the West Midlands.
