A New Prime Minister and Two Big Promises for Hospitality. Here's What They're Actually Worth.

Andy Burnham became Prime Minister on 21 July 2026. Within 48 hours, hospitality had his attention in a way it hasn't had from Downing Street in years.

Two policies are in play. A 20% cut to business rates for hospitality — reportedly being finalised for announcement within days. And a reduction in hospitality VAT from 20% to 10% — backed by Burnham in principle, campaigned for by over 270,000 people via the VAT's the Problem petition, but not yet confirmed as government policy.

For anyone operating a hospitality franchise, or evaluating one right now, both of these matter. But they matter very differently. And neither is a reason to change your decision-making framework.

Here is what we know, what is still uncertain, and — most importantly — what it actually means in your P&L.

What's confirmed: business rates

The business rates cut looks all but certain. During the Makerfield by-election campaign that effectively launched his path to Number 10, Burnham committed to slashing business rates for pubs, clubs and music venues by 20%, and to raising the threshold at which independent hospitality, leisure and retail businesses start paying rates at all. The plan is reportedly funded by increasing rates on large out-of-town distribution warehouses — shifting more of the burden onto the major online retailers.

This is a meaningful change, and it arrives on top of the April 2026 restructure that already introduced permanently lower RHL multipliers. If the 20% cut is applied to existing rates bills, it represents a genuine fixed cost reduction for the sector.

To put it in unit economics terms: a hospitality site paying £20,000 in business rates annually would see that fall to around £16,000 — a saving of £4,000 per year. Not transformative on its own, but in a sector where net margins are routinely running at 8–12%, a £4,000 improvement to the fixed cost base is not nothing.

For pubs specifically — which have carried a disproportionately high rates burden relative to their revenue for years — the combined effect of the RHL multiplier reform and a further 20% cut could be the most significant rates relief the sector has seen in a generation.

The threshold change for independent operators is also worth watching. If the rateable value threshold rises meaningfully — details are not yet confirmed — some smaller single-site operators may come out of the rates system entirely, which would be a substantial boost to their unit economics.

What's not confirmed: VAT

The VAT picture is more complicated.

Burnham has previously said he would argue for a VAT rate more in line with European norms, where France, Italy and Spain all charge 10% on hospitality. He backed the campaign publicly before becoming PM. But since taking office, no formal commitment has been made, and his team has declined to confirm it as policy.

The reason for the hesitancy is not hard to find: cutting hospitality VAT from 20% to 10% would cost the Treasury somewhere between £10 billion and £12 billion annually. Tax experts have raised legitimate questions about whether that cost is justified given the structural shape of the benefit — a proportion of the saving flows to large chains and franchise groups rather than the independent operators the policy is most often discussed in terms of.

The sector's case is strong. The UK charges among the highest VAT rates on hospitality in Europe. Only Denmark is higher. The pandemic-era temporary reduction to 5% demonstrated that lower VAT produced measurable growth in sector revenue and employment. The VAT's the Problem petition has 270,000 signatures, and over 50 cross-party MPs have backed it.

But “strong case” and “confirmed policy” are different things. The Budget — when it comes — is where this will be decided. Until then, a VAT reduction should not be in your unit economics model.

What this means if you're evaluating a franchise right now

There is a temptation, when a new government makes positive noises about your sector, to factor those promises into your financial planning. We would caution against it — not because the policies are unlikely, but because your unit economics need to work based on what is confirmed today, not on what might be confirmed in six months.

• Business rates: the 20% cut is close to confirmed, but the exact mechanism, timing, and which properties it applies to are not yet published. Build your model on current rates. If the cut lands, treat it as upside.
• VAT: do not put a 10% VAT rate in your projections. If it happens, it will be material — for a unit turning over £500,000, moving from 20% to 10% VAT has significant implications for pricing strategy, margin, and consumer demand. But it is not confirmed, and a decision made on the assumption it will happen is a decision made on hope rather than data.

What does change right now is the policy context around hospitality. For the first time in several years, the sector has a Prime Minister who has demonstrated genuine familiarity with the pressures operators face — NI costs, rates burden, wage inflation, delivery platform economics — and who has made specific commitments rather than general expressions of sympathy. That context matters for the medium-term investment case. A franchise agreement signed today will run for five years. The policy environment over that period now looks more constructive than it did six months ago.

The bigger picture

Burnham's hospitality agenda, taken together, points toward a structural improvement in the cost environment for UK operators over the next 12 to 24 months. Business rates relief and a potential VAT reduction sit alongside his previously stated intention to review the April 2025 National Insurance increase — another significant cost pressure the sector has been carrying.

If all three materialise, the combined effect on franchise unit economics could be material. A unit that is currently marginal — running at 8–10% net margin under 2026 cost conditions — would look considerably more robust under a lower rates bill, lower employment costs, and a VAT environment that makes hospitality more affordable for consumers.

But it's worth being honest about what we don't know. The timetable for a Budget is not yet confirmed. The VAT commitment is not yet made. The NI review is mentioned but undetailed. In the meantime, the NLW is still at £12.71 and rising. Food inflation has ticked back up to 4.4%. Three hospitality venues a day are still closing.

The businesses that will benefit most from a better policy environment are the ones that have already built themselves to survive the current one. A franchise unit with sound unit economics under 2026 cost conditions becomes a significantly stronger business if Burnham delivers on his hospitality agenda. A marginal unit that was counting on policy relief does not get easier to run just because the policy direction looks better.

What to watch for

Over the coming weeks, there are two things worth tracking closely.

The business rates announcement — expected imminently — will confirm the mechanism, timing, and which properties qualify for the 20% reduction. Read the detail, not just the headline. The threshold change for independent operators may be as significant as the percentage cut, depending on how it is drawn.

The Budget — when it is scheduled — is where the VAT question will be answered. If Burnham confirms a 10% VAT rate for hospitality, it will be one of the most consequential policy changes the sector has seen since the pandemic temporary cut. If he doesn't, the current 20% rate remains and unit economics should be modelled accordingly.

We'll be covering both as they land. In the meantime, if you're evaluating a franchise opportunity and want to work through what the current and potential future cost environment means for the specific unit you're looking at, that's a conversation worth having before any decisions are made.

Franchise Foundry is a franchisee-first matching service for the UK hospitality sector. We work for the buyer, not the brand. For an honest view of what a hospitality franchise opportunity looks like under current conditions, start with Find Your Match or get in touch directly.