The UK hospitality sector, including restaurant owners, are looking at a drastic change owing to the 2024 UK Autumn Budget. The massive increase will be felt from April 2025. The measures bring increased costs affecting profitability for most of the restaurants in the industry. It means restaurants will face considerable change in labour costs due to National Insurance and business rates relief.
Table of contents
- Introduction
- Labour Cost Savings
- Business Rates Relief: The Harsh Reality
- A 25% Profit Reducer: A Blowing Blow
- Initial Cost Control and Return on Investment
- GP and Waste Management Efficiency
- Where STO Saves the Most
- Conversion of Challenges into Opportunities
This Autumn Budget 2024 threatens UK restaurants with serious challenges on labour costs and making way into rather, thin profit margins of business rate relief. For the majority, taking on restaurant management software like StockTake Online will help them save on major costs at the times of such pressure. Let us take this step-by-step at how restaurant management software will save your hospitality business both time and money.
The latest UK Budget, including an increase in National Insurance contributions and the National Living Wage, is triggering rising costs amidst which the hospitality sector is struggling to cope. Heart With Smart, the operator of Pizza Hut's UK dine-in restaurants, is reportedly raising over £10m to counter financial pressure and invest in cost-cutting technology, BBC reported amid the crisis.
The investment will prioritise the adoption of technology through touch screen kiosks and contactless ordering at the table, already trailed on a few sites. This is expected to be a way of reducing labour dependency while serving the same quality.
According to a company spokesperson, though the organisation might reduce its workforce in some aspects, large redundancies are not expected.
This situation highlights the prompt need for restaurants to switch to new technologies to help them cope with decreasing margins due to the recent budget.
Labour Cost Savings
The National Living Wage rises to £12.21 an hour for workers above 21 which is a major change for restaurants. Employer NICs are now 15% following a rise from the historic low of 13.8% which is a relief on one but at the same time a cost cutting factor for restaurants. These combine to produce compound labour cost inflation in the UK. If we consider, XYZ restaurant whose annual turnover is £700,000 and is employing 30 staff members, the overall labour costs increase from £250,000 to £281,200. A rise from 32% to 35.7% which is a substantial difference in the business as every small amount gathers up to form the restaurant profits.
A Purchase Manager in the UK earns an average annual salary of £36K. (Purchasing Manager Salary in United Kingdom in 2024 | PayScale). Automation tools put an end to massive costs as you would not have to hire for manual tasks like inventory control and purchasing costs, as it an easy skill to be learnt in the existing labour structure in the restaurant. approximately costing less than 10% of the cost of the Purchase Manager annually at approx. £ 2500 + VAT.
Business Rates Relief: The Harsh Reality
This cuts business rates relief from 75 percent down to 40 percent, which goes that much harder on P&Ls of the restaurants. From a restaurant that will now go from a current £5,051 per annum to over double the amount at £12,122, this increases costs by £7,071 which makes a stark difference in this industry.
A 25% Profit Reducer: A Blowing Blow
These may slash profits to £78,960 for an EBITDA of £105,000 for a performance restaurant. In effect, they eliminated 25% of profitability that simply equates to three months' revenues lost overnight. Which might look small for starters but will make a huge dent eventually.
Initial Cost Control and Return on Investment
While STO requires a one-time investment starting from £150 to £1,530, the real savings are enormous overall. A trusted source mentioned saving approx. £30,000 last year just by using our software which is a huge sum for a restaurant. What you invest in our software will return to you with soaring profits in no time.