It has already been a tough start to 2025 for London’s rightly celebrated restaurant scene, arguably the most vibrant and diverse in the world. But for how much longer?
Gloomy London diners have been reluctant to go out and spend big during these dark early months of the year — and there have been casualties. Last month The Petersham and La Goccia, the Covent Garden restaurants from the Petersham Nurseries owners, both closed their doors after six years.
On February 15 one of Europe’s most celebrated female chefs, Anne-Sophie Pic, threw in the towel at her restaurant La Dame de Pic at The Four Seasons hotel near Tower Bridge after eight years. The list goes on. The grim tally is bad enough, but the industry is holding its breath for what it fears could be a far worse cull after April.
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Since last October when Rachel Reeves lobbed a National Insurance hand grenade with a long fuse at the hospitality sector, it has been preparing for the detonation. On April 6 it will explode, with potentially devastating consequences. On that date, the rate of employer National Insurance Contributions (NIC) goes up from 13.8 per cent to 15 per cent, while — and this is the real kick in the guts — the earnings threshold at which they start to be charged falls from £9,100 to £5,000 a year.
This will drag thousands of part-time workers into NICs for the first time and hugely increase the cost of many lowly paid staff on the national living wage, which is of course, also going up, by 6.7 per cent on April 1. The double whammy will typically add around £700 to £800 a year to the cost of employing a member of staff. Industry group UKHospitality estimates that the impact of the NIC changes in London alone could be close to £300million.
For restaurateurs it means having to make some exceptionally tough choices if they are to survive the rest of 2025 and thrive beyond that. James Robson, co-founder of the company behind Haymarket’s Fallow and Roe in Canary Wharf, says: “It feels like we have to be at battle-stations ready. We’ve already seen staff costs creep up to closer to 40 per cent than 30 per cent the last few years.
“We have never been so focused on finding efficiencies with team members. New site or business growth is generally off the table unless something gives with the tax regime or rent levels.
“The ultimate outcome will be unemployment rising. I’ve had over 10 existing 5,000 sq ft plus sites offered to me the last two weeks — more than the whole of last year — which basically sums the market up. Sadly I’m aware of two good businesses shutting in the past few days with more than 300 staff made redundant.”
It feels like we have to be at battle-stations ready. We’ve already seen staff costs creep up to closer to 40 per cent than 30 per cent the last few years
Some restaurants say they will be forced to put other prices up. But others insist hard-pressed diners simply will not tolerate even more expensive meals and they will have to find other ways to cut costs and make the sums work. Martin Kuczmarski, founder and CEO of The Dover in Mayfair, lays out the options starkly: “You have three choices: one, you look at everything back of house that doesn’t affect the customers, you look at that — you speak to the suppliers, can you get things slightly cheaper, from steaks to washing up liquid? It takes a lot of effort, lots of good relationships with people, from suppliers to your landlords.
“Option two, which I completely disagree with, is to pass the cost on to the customer, wholesale. We already know central London is so overpriced. It’s easy to raise the prices, but it’s lazy. Option three, you cut your costs where you can, and you fiddle with the prices, but only slightly. We’re going with option one. I will try to find something else — can I hire out the place for big events, can I offer it for movies?
“We’ve been planning since November to make these changes. We have a lot of beautiful red roses; we spoke to our beautiful florist, can she make a £1 discount on one rose, and it makes a difference. Can we change the toilet paper? We look at everything. There are many, many things you can do.”
Another well known central London restaurateur, who did not want to be identified, said: “We’re doing all kind of little adjustments, which we would prefer not to do — taking away paper towels, changing the oil in the lamps to something cheaper. We’re changing what we can, saving where possible. But it’s the small things in restaurants that make them special.” Gavin Rankin, owner of Bellamy’s in Mayfair, says: “Costs are going up all over the place and it’s a nightmare, but I think people tend to get distracted — largely accountants — thinking that the price of the menu has to go up. I don’t think that’s right. Conversely, I think the price going down will help more.”
“People are definitely thinking twice about going out, much more than they used to. You need them to want to come in. Stack ’em high, sell ’em cheap!”
Charlie Gilkes, co-founder of the bars operator Inception Group, says those higher costs now posed an existential risk to the sector: “I am increasingly hearing the business model is broken for hospitality businesses in the UK and operators are looking to open in other territories like the UAE with a less hostile environment for business. For many bars, pubs and restaurants, this is the final nail and they won’t survive.”
Jacob Kenedy, co-owner of Bocca di Lupo in Soho, says the real victims will be workers in the industry who rely on it to put food on their own tables. He warns: these changes make it dramatically less attractive to employ lower-paid workers. The cost to Bocca Di Lupo — a 70-seater restaurant — is about £140,000 a year.
“We are fortunate to be able to survive this battering, provided revenues hold, but there is a risk if these changes trigger inflationary price rises across the board and reduce the number of people in work, people will spend less and some contraction be inflicted on the economy.
“Without a doubt, businesses will close. I have seen some already do so, based just on forecast. This is a retrograde step that will stifle any glimmers of growth, rather than encourage it.”
