Business rates relief: is this an industry-wide solution to an industry-wide problem?

From April 2027, eligible businesses including pubs, social clubs, and live music venues will benefit from a 20% reduction in their business rates bills. The Government describes the measures as part of its drive to support local high streets and business. The reduction is expected to save the typical pub around £1,100 a year. It follows existing support for pubs and live music venues, including 15% relief on their 2026/27 business rates bills.

However, the relief does not extend to hotels and restaurants, despite many of these businesses facing the same, if not greater, cost pressures. While this will undoubtedly be welcomed by those businesses that qualify, for the wider hospitality sector the announcement may feel like the support has fallen short.

Hotels and restaurants have faced substantial increases in business rates following the latest revelation. The average hotel is expected to see its business rates bill increase by 115% between 2026/27 and 2028/29, while restaurants are facing increases of 54%, yet neither are included within the Government’s new 20% reduction.

The 20% reduction may provide valuable breathing space for qualifying businesses; however, it does not fundamentally change the wider financial landscape. For hotels and restaurants excluded from the new relief, the announcement may instead reinforce concerns about the sustainability of businesses already struggling with increased fixed costs.

Directors should remain alert to early signs of financial distress and take appropriate advice at an early stage. Where cash flow is tightening, early engagement with landlords, lenders, HMRC, and other creditors can be critical.

If you are a director of a company which is facing financial difficulties, you should consider taking the following steps, to protect your own personal liability and the company creditors:

• Seek independent advice from a lawyer or licensed insolvency practitioner as soon as you become aware of potential financial difficulties. They can advise you on your options and whether a recovery strategy or insolvency strategy is more appropriate.
• Always keep your director duties in mind. Your actions must comply with these duties and may be scrutinised at a later date by an officeholder if the company enters into a formal insolvency process.
• Only continue trading if it is the best course of action for creditors as a whole and take steps to minimise the loss to creditors.
• Maintain a good and consistent line of communication with all creditors.
• Have regular board meetings to discuss the company’s financial position, and keep detailed and accurate minutes which set out each step taken to improve the creditor’s position or ensure their interests are not prejudiced. Keeping minutes will assist the board should they be required to explain their decision-making later.
• Immediately respond to any demands for payment and legal proceedings served on the company, even if you cannot pay them.
• Ideally every week you should ensure that realistic budgets, forecasts, and management and trading accounts are reviewed.
• Ensure accounts are being properly kept up to date.
• Conduct a full review of the costs and expenditure of the company; consider what non-essential expenditure can be reduced or avoided at an earlier stage.
• Check what insurance cover the company has and review the policy documents carefully, and seek guidance from your broker if necessary.
• If avoiding insolvent liquidation is not an option, you should take immediate advice on instituting a formal insolvency procedure without delay.

If you are concerned about the above impacts or the financial health of your company, please contact Aman Sehgal.