Nothing tarnishes an evening out quite like a row over the size of the bill. But leading figures in the hospitality sector fear Labour’s first budget in 14 years has put them on a collision course with their guests over the fair price of a meal. Neither side has much room for manoeuvre. Despite easing inflation, prices are still rising and consumers still bear the scars of a cost of living crisis that has eroded disposable income. Few will accept what one restaurateur called “expensive mediocrity” from chains that have relatively little to offer the discerning gourmand but have jacked up their prices to levels that suggest they do. Figures from Barclays show that people are opting for Netflix over nocellara olives. Spending on eating out flatlined in October, while outlay on digital subscriptions rose by 10%. Darker evenings and colder temperatures may be having an impact, but so too are the conditions that have made it harder for hospitality to thrive. As they stumbled about for a secure footing after the pandemic, rampant inflation had already left pubs and restaurants facing a painful choice: raise prices to protect wafer-thin margins, or accept losses to retain customers, in the hope that conditions will ease. Into that devil’s bargain came the measures introduced by the new chancellor, Rachel Reeves, which industry leaders say mean even higher prices when the bill comes. Increases in employers’ national insurance contributions (NICs), coupled with a minimum wage rise, mean employing a full-time staff member will cost an extra £2,500 from April, according to UK Hospitality. At the weekend, the leading trade body for the sector upped the pressure on the government by writing a letter to the chancellor – signed by more than 200 hospitality bosses – claiming the cost increases would inflict “unprecedented damage”, including small business closures within a year, “drastic” job cuts and cancelled investment. The only crumb of comfort for the sector has been a vague promise to lower business rates – a system that most hospitality leaders think needs a total overhaul – and even then not until 2026 at the earliest. Tim Martin, the outspoken boss of JD Wetherspoon, has estimated the extra cost to his 800 pubs and 50 hotels at £60m in a year – a sum large enough to have wiped out most of its profits last year. “This budget will put a lot of extra pressure on quite a weak sector,” hesaid, after warning of price rises as a result. Even the proprietor of Lancashire gastropub the Parkers Arms, who, unlike Martin, is a “committed socialist”, says the extra cost is going to be hard to manage. “It seems [Reeves] has taken into account the people who really need some help,” said Stosie Madi. “People have to pay for the NHS. “But she is a bit naive in drastically imposing the taxes on us when we’re still crippled by the government that’s just gone.” Two hours’ drive east, in York, Neil Bentinck, the head chef and owner of Skosh, has recently introduced a new earlier Saturday sitting, using staff who were already going to be on-site anyway. “That was to increase profits, but the extra revenue will now only balance out the extra cost [of the budget],” he said. Like many in the sector, Bentinck is wary of whining about external conditions. He said there was always clamour for high-quality food, as long as diners feel they are getting their money’s worth, pointing out that Skosh is still fully booked at £70 a head. Bentinck feels some kinship with consumers who are thinking twice before eating out at restaurants that do not pull out all the stops to deliver good value. “The kids wanted steak, so we tried this place where we paid £30 for just a piece of meat with half a tomato,” he said. “I know that piece of meat costs £3. And then it’s £5 for a bowl of frozen chips. That’s expensive mediocrity and it’s very prevalent.” Chains that were once thought of as a value night out have hiked prices by as much as a quarter to offset inflation in their costs, according to data from Lumina Intelligence, which provides market insight in the food and drink sector. Between the third quarter of 2023 and the summer of 2024, average prices at Bill’s went up by 26%, by 24% at Wagamama, by 19% at Nando’s and by 13% at Pizza Express, it says. In autumn 2022, a single American Hot at Pizza Express cost £13.48 on average, but has risen to £16.75, and will cost £18.25 in London, according to the data. At large chain restaurants, often owned by private equity investors who hunger more for profit than good food, there is always more incentive to squeeze customers than at smaller independent venues that rely heavily on loyalty and their passion for cooking. “If the investors want X amount of profit, they’re going to be saying you need to charge more,” Bentinck said. But even restaurants that have not raised their prices, while offering gastronomic excellence, are being hit. “We have a robust hearty menu for £50. It’s the same price we’ve had for two years and haven’t been able to put it up,” said Madi. “A lot of people who would normally go for the three courses are going for the walk-in menu and spending £25 instead. “They’d have had a cocktail pre-dinner, maybe a dessert wine with pudding. Now they don’t do that. People are watching the pennies out there.” Figures from the hospitality industry consultancy CGA by NIQ back that up. A third of consumers say they are choosing cheaper food options, while 41% are cutting back on drinks. The top five reasons that survey respondents cited included the lack of cash in their own pockets or the extra on the bill at the end of the night. On top of the increasing frugality comes far less forgivable behaviour on consumers’ part, with “no-shows”, where diners reserve a table but never show up, at a record high. Unsurprisingly, business leaders caught in the pincer movement of higher costs and more cautious consumers are beginning to lose heart. Only 20% of hospitality bosses are feeling confident about the future of the sector over the next 12 months, according to a survey by CGA by NIQ. That is nearly half the proportion (36%) who felt that way just three months ago. UK Hospitality estimates that the 130,000 venues owned by its members would have to raise prices by up to 8% to cover the extra cost of employing staff as a result of the budget. But with consumers already choosing box set nights in over epicurean nights out, the trade body says businesses simply cannot risk doing that. Instead, they will avoid recruitment, constraining growth in a sector that the trade body says contributes £93bn a year to the economy. Kate Nicholls, the chief executive of UK Hospitality, said the best hope for the industry was a shift in how the nation perceived the economic picture. “If you can get growth going, if you can get positive consumer sentiment going, that might be something that saves the sector.” But she is concerned that the government may have helped trigger the drop in confidence by getting itself into a “doom loop”, constantly talking down the economy. “In July, there was a sense that growth was better, inflation was coming down, interest rates were coming down. The Conservative party was talking that up [during the general election campaign]. “As soon as Labour came in, all the talk was that things are an awful lot worse than we thought, there’s going to be a lot of pain, finances are in disarray. “If Rachel Reeves and Keir Starmer are saying it’s bad, people all hunker down and we see spending, confidence and footfall tank on the back of it. “There’s a need for the government to talk up the economy.”