Business rates hike: 64% of UK hospitality to cut jobs
Minimum wage and business rates in the UK will increase from today (1 April), with a new survey investigating the actions taken by venues in response.
The UK government announced its new business rates system in the autumn Budget, although it later backtracked and announced a 15% discount for pubs.
Minimum wage for over 21s also increases by 50p today to £12.71 (US$16.85) an hour.
UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster polled their members on how they are planning to manage these cost increases.
Nearly two-thirds (64%) said they would cut jobs, while 15% said they would be forced to close.
A further 51% said they were cancelling investment plans and 42% were reducing trading hours.
Outside of the government’s changes, businesses also cited the increasing cost of energy as a concern. The survey was conducted prior to the situation in Iran, when 93% of respondents said energy costs were impacting profitability.
In terms of measures that could help, 89% supported a VAT reduction for hospitality and 74% wanted a permanent reform of business rates.
Another cost hitting businesses is the increase in employers’ National Insurance Contributions (NICs) that was introduced last year. Of those surveyed, 65% said they would support changes to these rates.
If the tax burden on on-trade businesses were lowered, 70% said they would prioritise refurbishing and developing existing sites, 46% would create new jobs and 27% would open new sites.
In a joint statement, the trade bodies said: “Yet again, hospitality businesses enter April facing billions of pounds in additional costs, which will force many to make heartbreaking decisions.
“Despite the necessary and welcome support for pubs on business rates, neighbourhood restaurants, local hotels and independent cafes all face their bills rising in the thousands.
“Hospitality’s tax burden – the highest in the economy – is suffocating the sector. The impact is clear: more lost jobs, less investment and business closures. The jobs, communities and livelihoods we support are hit once again.
“The worrying situation facing the business energy market has the potential to accelerate all of these impacts.
“Even before the conflict in Iran and the Middle East began, increasing energy prices were already impacting profitability and the government should be prepared to support vulnerable businesses if they are thrown into yet another crisis.
“Hospitality businesses are clear that cutting their costs through a lower rate of VAT, business rates reform and changes to employer NICs will deliver new jobs, investment and growth.
“The benefits of backing our local pubs, restaurants, hotels, leisure and tourism businesses are obvious and if the government works with our sector we can keep people in jobs, make our high streets flourish, and drive growth.”
Real reform
Although the government promised to reform the rates system in the autumn Budget, much remained the same, with many businesses paying more from today.
Today, the Valuation Office Agency will update the rateable values of non-domestic properties to reflect changes in the property market.
Chris Grose, rating director at Hartnell Taylor Cook, said the system was “based on outdated rental values”.
He said: “We need to reform the system, starting with delinking the rate in the pound – which should be a single, fixed rate that is not changed annually – from the total value of the rating list and removing reliefs as an anchor.
“Reliefs are temporary by nature; they are signs of placation and not progress. Once introduced, they also prove hard to strip away… These reliefs skirt around the core problem: the need to get rid of any mismatches between rateable values, the rate in the pound, and their relationship to a market that has changed significantly since 1990.”
He added that on-trade businesses tend to underutilise the appeals process, and that avenues exist to dispute valuations. He said: “While this comes with some caveats – appeals must take place within a certain timeframe, and for a small fee – the savings this opens up in the long-term can be significant.”
Grose believes the successful rate of collection makes the current system “an effective way of keeping the money coming in, especially in a world where no one really wants to cover the tab”.
He concluded: “If the government does want to keep the system they have, they would do well to strip it right back to the basics.”
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