Hospitality faces £3.4bn annual cost increases
As National Insurance contributions (NIC) and minimum wage increases come into effect this month (April), one trade body has calculated that UK hospitality businesses are staring down the barrel of an annual cost upturn of £3.4 billion (US$4.4bn).
According to UKHospitality, British on-trade businesses will now face an additional £1.9bn (US$2.46bn) in wage costs, £1bn (US$1.29bn) in employer NICs, and £500 million (US$646.9m) in business rates as a result of relief being lowered from 75% to 40%.
The cost of employing a full-time member of staff aged over 21-years-old has risen by more than £2,500 (US$3,234.50) annually – a 10% increase – while the cost of employing staff aged below 18-years-old has grown by 18%, and between 18- and 20-years-old it has gone up by 16%.
Seven in 10 hospitality businesses say they will have to reduce their employment levels as a result, risking job losses and lost income for workers. A third say they will cut trading hours and 15% believe they will have to close at least one site.
As a result, UKHospitality is urging the UK government to urgently bring forward a plan for hospitality businesses that enables the sector to unlock growth and jobs.
The trade body says this plan would have to set out how the government intends to reduce the costs and red tape that plague the sector and should include the Treasury ensuring its business rates reform, to be unveiled in the autumn, offers the maximum discount for hospitality businesses.
‘Chilling effect’
Kate Nicholls, chief executive of UKHospitality, said: “The costs hitting hospitality this month are eye-watering, and the impacts it will have on businesses, teams and communities are stark.
“We’ve already seen a chilling effect on investment plans and job creation – all of which have been put on hold or shelved.
“As costs begin to bite, we’ll see venues having to tighten their belt even further through restricting trading hours or, in a worst-case scenario, cutting jobs.
“None of this helps the government’s ambitions to drive growth or get people back into work. It needs sectors like hospitality to achieve both of those goals, but with disjointed tax and welfare policies, that is looking more difficult than ever.
“Hospitality has the ability to generate socially productive growth and create jobs for everyone, everywhere, but this level of cost ties our hands behind our back. I urge the government to work with us to bring forward a plan for hospitality that addresses these issues and backs the sector to serve Britain and create places where people want to live, work and invest.”
Last month, nearly half of UK hospitality companies said they don’t expect to survive 2025.
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