The UK government’s Autumn Budget will take effect in April 2025, and it brings some tough changes for restaurant owners. Rising labour costs, higher National Insurance, and reduced business rates relief will put serious pressure on your bottom line.
For a typical restaurant turning over £700,000 a year, these changes could wipe out 25% of profits. That’s like losing nearly three months of profit overnight.
If you run a restaurant, you already know there isn’t a lot of spare margin to absorb this hit. You need a plan to protect your business and stay profitable in 2025.
Breaking Down the Restaurant’s P&L Impact
Here’s how a £700k revenue restaurant will be affected:
- Current EBITDA: £105,000 (15%)
- New EBITDA after budget changes: £78,960 (11.3%)
- Profit reduction: 24.8%
Labour Costs: The Biggest Challenge
The biggest hit to your restaurant’s P&L will come from labour costs. The new budget increases both National Living Wage and National Insurance contributions:
- National Living Wage rises 6.7% to £12.21 per hour for workers aged 21+
- Employer National Insurance rises from 13.8% to 15%
For a restaurant with 30 employees:
- Current labour costs: £250,000 (32% of revenue)
- Extra wage costs: £21,952
- Extra National Insurance: £4,088
- New total labour costs: £281,200 (35.7% of revenue)
These increases mean labour costs will eat up a larger chunk of revenue, reducing profitability.
Business Rates Going Up
The government is reducing business rates relief from 75% to 40%. This means higher costs for restaurants.
- Current business rates bill: £5,051 (with 75% relief)
- Future business rates bill: £12,122 (with 40% relief)
- Extra cost: £7,071 per year
For restaurants operating on tight margins, this added expense can significantly impact financial stability.
How to Take Back Your Margin
This budget is tough, but there are clear steps you can take to protect your profit.
Reduce Labour Costs Without Cutting Staff
Getting labour deployment right is key. Smarter scheduling based on sales forecasts means you can run a more efficient team, saving 10-15% on labour costs. That’s a potential £25,000 back in your pocket.
Restaurants that implement better scheduling strategies see:
- Reduced overstaffing during slow periods
- Increased efficiency during peak hours
- Lower overall payroll costs
Increase Sales During Peak Hours
Having the right number of staff at the right times boosts service speed and increases revenue. Restaurants using sales forecasting see a 3% rise in revenue (£21,000 extra per year).
Better forecasting helps to:
- Maximise peak period revenue
- Improve table turnover rates
- Enhance guest experience leading to repeat customers
Cut Waste and Improve Profit Margins
Managing stock smarter means less waste and a 2% improvement in gross profit. That’s an extra £4,200 saved per year.
Stock and waste control improvements include:
- Smarter inventory management to avoid over-ordering
- Real-time tracking of food waste
- Improved supplier ordering processes
Combining These Strategies for Maximum Impact
By making these small but smart changes, you can offset the impact of the budget and even improve your overall profitability. Here’s how the numbers add up:
- Labour cost reduction: £25,000 saved
- Sales increase: £21,000 extra revenue
- Waste reduction: £4,200 saved
- Total impact: £50,200 improvement
That’s not just surviving the budget changes – that’s growing despite them.
The Bottom Line: Take Action Now
With April 2025 fast approaching, restaurant owners must act now to safeguard their business. Waiting until costs rise will only make it harder to recover lost margins.
By focusing on labour costs, sales forecasting, and waste reduction, you can turn a potential profit loss into a gain.
What Next?
Start preparing now. Book a meeting today to see how we can help you protect your business before April 2025.
