UK Hospitality Firms Warn of Staff Cuts Due to Tax Changes
Many hospitality businesses are preparing to cut staff due to tax changes starting in April. Research conducted by various industry organizations reveals that about 70% of these businesses, including pubs, bars, restaurants, and hotels, expect to reduce their employee numbers because of rising costs and decreased rates relief introduced in last autumn’s budget.
The survey, which included feedback from members of the British Beer and Pub Association, the British Institute of Innkeeping, Hospitality Ulster, and UKHospitality, found that around 60% of the businesses surveyed intend to cancel investment plans because of the increased financial burden.
These industry groups are urging the government to delay the new employer national insurance contributions (NICs) because they believe it will have a negative impact on jobs and investments in the hospitality sector. The government announced last October that from April, the employer NICs will increase to 15%, and the threshold for contributions will drop from £9,100 to £5,000. Additionally, the national minimum wage is set to rise by 6.7% to £12.21 per hour starting in April.
While the government claims these changes are necessary to raise around £25 billion annually for improving public services, many large retailers and hospitality companies disagree. They argue that these changes will lead to job cuts and higher prices for customers. The trade groups expressed concerns, stating, “At a time when hospitality has been one of the top contributors to economic growth, the last thing the government should be doing is piling on costs that will impact employment and cut off our ability to grow.”
The industry representatives emphasized that failing to delay the NICs changes could hurt communities, employees, and supply chains. Many businesses have voiced their concerns about the potential loss of earnings and jobs, cut back in trading hours, and some may even be forced to close their doors completely. This could lead to the loss of community hubs that play a critical role in the local economy and job creation.
The survey also highlighted that nearly 29% of the businesses indicated they would reduce their trading hours due to the increased costs, while 25% reported having no cash reserves left. This figure is six percent higher than three months earlier. Furthermore, 15% of respondents mentioned they might close at least one location to remain operational.
In a related finding, separate research showed that the average salary advertised in the UK reached nearly £41,000 in January, with significant pay increases noted in various sectors such as manufacturing, maintenance, and retail. It has been noted that job vacancies reduced to just under 830,000 in January, marking the lowest level for that month since 2021.
Additionally, reports from the Office for National Statistics indicated that salaries rose sharply in the last quarter of 2024 and that unemployment remained stable despite concerns from businesses about potential job losses due to the announced changes in the budget. The rising average salaries reflect the growing competition for talent in key industries, even as hiring rates slow down. This situation means jobseekers will face a more competitive job market, while employers will continue to find it challenging to attract and keep talented individuals.
