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The UK hospitality industry has warned that last month’s Budget tax increases will result in staff layoffs and business closures. In an open letter signed by more than 200 figures, the industry states that the rise in National Insurance Contributions (NICs) paid by employers is unsustainable given current financial constraints. The letter also contends that the industry has no available means of transferring costs to customers without putting smaller firms at risk.
The changes in the budget will see the rate increase from 13.8% to 15% for employers, and the threshold for employee salary taxation will fall from £9,100 to £5,000 per year. The current plan is estimated to generate £25bn for public services, such as the NHS. Leading hospitality figures, including the heads of UKHospitality, Stonegate Group, Fuller’s and Whitbread support the letter. The signatories of the letter argue that the NIC threshold changes will have a regressive effect on low earners and flexibility for parents and elderly workers.
It is expected that businesses will decrease investment and consider staff layoffs, with fewer working hours for some, due to the increased costs. The Office for Budget Responsibility (OBR) has calculated that the impact of the higher NICs will hit employees, who will face reduced wages and increased unemployment, particularly for low-paid workers. The government has no plans to alter the budget agreement.
The letter comes in the wake of the UK supermarket groups Marks & Spencer and Sainsbury’s recently indicating they may have to increase prices as a result of the higher costs. Sainsbury’s pegs the cost of the NI changes to its business at £140m. According to the chairman of Wetherspoons, hospitality businesses plan to pass their increased costs on to customers
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