Hospitality workers and trade bodies believe the introduction of a National Living Wage will have a considerable impact on the industry.
Martin Couchman, deputy chief executive of the British Hospitality Association (BHA), said: "We certainly weren't expecting this announcement; I don't think anyone was really."
He said it was too early to tell exactly what impact the introduction of a living wage would have on the sector but that it's likely to be considerable.
"Businesses will have already set their own budgets for the next 12 months and this is not something they would have considered and will now have to address," he added.
"It is interesting Chancellor George Osborne chose to use the term ‘living wage' as people seem to be using it for different numbers so it could get quite confusing.
"I think this is something the public will see as a popular move but it is likely to have an impact on the hospitality industry."
He said over 30% of the industry's costs were spent on wages, and employers could start to look to employ more workers under the age of 25 to avoid additional overheads.
Independent hotelier Tim Hart, who has run the four-red-AA-star, 17-bedroom Hambleton Hall near Oakham, Rutland, for 35 years, said that as the result of the introduction of a National Living Wage, hospitality operators will effectively have to pay for the government's decision to slash welfare payments.
"In order to deal with hardship affecting those losing benefits, the chancellor appears to have condemned caterers to giving very large pay rises to millions who are nowhere near claiming benefits," he said. "The losers will be low-paid employees who lose their jobs."
Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers, which represents some 17,500 pub, club, bar and casual dining operators, agreed that the introduction of a National Living Wage could lead to job losses and urged the government to the take into account the amount workers take home, their total earnings and benefits such as pensions not just the headline hourly rate.
"We also need some sensitivity surrounding the timetable for introduction, with wage rounds currently planned around April," she said. "The chancellor is right, the best way to help the lower-paid workers is to allow them to keep more of the money they earn and the changes announced to Personal Allowance are set to put an extra £900 per year in the pockets of our workforce and consumers.
"Measures such as these have the dual effect of aiding both businesses and staff and we urge the government to bear this in mind when it comes to consult on the National Living Wage. Having a higher hourly rate benefits no one if it is at the expense of a job."
Alison Gilbert, HR director, CH&Co Group admitted the move would be challenging but expressed her support for the plans. She said: "It's good that the hard-working frontline teams who provide great service to customers day after day are the ones that will really benefit from the introduction of the new Living Wage. At CH&Co Group, we've been working with a growing number of clients in recent years who are keen to ensure that all staff that work with them are paid the Living Wage and we have wholeheartedly supported them in this.
"The government plans give no individual organisations any commercial advantage or disadvantage in introducing this. Of course, given the low margins that our industry often works to, it will be a challenge to put it in place in many commercial contracts but we are adept at managing costs and generating sales and I do believe we have the skills and tools to introduce this over the timescale planned. After all, we've just come through one of the most challenging economic periods ever and the industry is still here and thriving and this initiative will ultimately help us reward and retain great people."