As NICs increase by £25bn, British pubs, restaurants, and hospitality firms face an uncertain future with rising costs expected to hit businesses hard.
Rising costs are expected to hit British pubs, restaurants, and hospitality firms hard as national insurance contributions (NICs) increase by £25bn from next weekend. The combined rise in employer NICs will force businesses to question whether they can continue operating.
From 6 April, the rate of employer NICs will rise from 13.8% to 15%, under plans announced by Chancellor Rachel Reeves last October. The threshold for the tax being levied will also be slashed from £9,100 to £5,000 a year, which business leaders warn will hit temporary and low-paid jobs particularly hard.
Hospitality, leisure, and retail will be hit particularly hard, largely as these sectors employ more low-paid workers and temporary staff. Kate Nicholls, the chief executive of UKHospitality, describes the government’s plan as ‘the most regressive tax change I have seen in 30 years in hospitality.’
The hospitality industry has undergone significant changes over the years, driven by advances in technology and shifting consumer preferences.
From traditional hotels to boutique accommodations and experiential travel, the industry has adapted to meet growing demands for unique experiences.
According to a report, the global hospitality market is projected to reach $1.3 trillion by 2025, with a focus on sustainability and personalized service.
Business leaders warn that the changes will undermine Labour’s main goal: to grow the economy. The chancellor argues that the money is badly needed to plug a shortfall in the government finances, but critics say taxing employment could be a counterproductive solution.
Some experts argue that the changes will incentivise employers to invest in technology rather than resorting to low-paid, unskilled work. Andy Haldane, former Bank of England chief economist, believes Reeves’s budget was ‘pro-growth’ because funding public services provides employers with a healthier, better-educated, and more mobile workforce.
Employment incentives are programs or benefits offered by employers to attract, retain, and motivate employees.
These incentives can take various forms, including bonuses, stock options, flexible working hours, and professional development opportunities.
According to a study, 80% of employees consider non-monetary benefits when choosing an employer.
Incentives can also improve employee engagement, productivity, and job satisfaction, leading to increased retention rates and reduced turnover costs.
Official jobs market data shows employment is holding up far better than the business community suggests. The policy comes in a tight jobs market, with wage growth running at among the highest rates in decades, as many employers struggle to find staff amid the loss of readily available EU labour after Brexit, and the surge in working-age adults leaving the jobs market due to ill health.
Business leaders say the tax changes will knock business confidence and make it harder for firms to hire, invest, and grow. The CBI‘s chief economist, Louise Hellem, warns that firms are squarely behind the government’s growth mission and want them to succeed, but the capacity for businesses to invest is crucial.
Youth unemployment has risen sharply, with the number of 16- to 24-year-olds not in employment, education, or training (Neet) at almost one million, the highest level for more than a decade. The tax changes will dent progress, says Nicholls, as employers are less likely to take a risk on someone who might not be able to work full-time.
Small businesses and entrepreneurs will also feel the impact of the increased NICs. Dan Brod, founder of Beckford Group, says his employment and investment plans will take a hit, already barely turning a profit with wage costs taking up 40% of turnover.
Business leaders are calling for alternative solutions to address the government’s financial shortfall, such as increasing income tax or VAT. Charlie Bean, ex-OBR board member and former Bank of England deputy governor, says taxing employment could be counterproductive and that any chance of a U-turn would be sensible from an economic point of view.
The hospitality industry is facing a crisis, with rising costs, reduced investment, and lower hiring prospects. Business leaders are urging the government to take action to address the issue, including reducing costs and increasing investment in public services.
The hospitality industry is facing a severe crisis, driven by factors such as staff shortages, increased competition, and rising operating costs.
According to a recent survey, 75% of hotels report difficulty in filling positions, while 60% cite reduced profit margins due to increasing expenses.
To combat this, businesses are adopting innovative strategies like automation, flexible pricing models, and enhanced employee benefits.
Meanwhile, travelers are adapting by prioritizing authenticity and experiential stays over luxury amenities.
