Fuller’s pub boss warns Budget tax changes will drive hospitality to the brink
The boss of pub chain Fuller, Smith and Turner has made a stark warning about the effect of recent tax rises on hospitality, warning it will increase inflation and drive businesses “to the wall”.
Chair of the London-listed firm known as Fuller’s, Michael Turner, said that the changes to employer’s national insurance contributions (NICs) announced in the budget “will cause particular pain” and “has been brought about by the Chancellor’s inadvisable promise not to increase taxes on individuals”.
Chancellor Rachel Reeves increased the amount employers have to pay in NICs by 1.2 per cent, and lowered the wage threshold employers must start paying the tax from £9,100 to £5,000.
The change will primarily affect industries which rely heavily on labour like hospitality and agriculture. Hospitality will be further affected by the threshold change, as many businesses rely heavily on part-time workers which were previously exempt from the tax.
Turner claimed “the Chancellor’s actions are a direct attack on those labour-intensive industries that are the lifeblood of our economy, whilst leaving the large City institutions, that can afford to pay their share, almost completely untouched.”
“The unintended consequences of these actions will be to drive inflation higher, put pressure on wages, and will drive many businesses to the wall,” Turner said, adding that he hoped the government would “reflect on its decisions”.
On the back of a rise in employers’ NICs, Reeves also announced an increase in National Minimum Wage of 6.7 per cent.
Speaking on BBC Radio 4 this morning, chief exec Simon Emeny said: “We still haven’t fully recovered profits post-Covid”, adding that “the cost increases that were announced two weeks ago in the budget will impact significantly across the sector.”
He called the change “a fresh challenge we’ll need to adjust our business for” and added it would create £3.5bn in extra costs across hospitality and £8m in extra costs for Fuller’s.
“It doesn’t feel like a budget for working people, it doesn’t feel like a budget for growth,” he said.
Fuller’s: Hospitality has been “plundered” for tax
Turner said that the hospitality industry has been “plundered” for tax over the years, and that this was a case of “history repeating itself”.
The British Retail Consortium has found that retail pays 7.4 per cent of all business taxes – £33bn – a share 1.5 times greater than its share of the overall economy, which is five per cent of GDP.
The tax bill is 55 per cent of the industry’s pre-tax profit, the highest proportion of all main business sectors. Business rates make up 11 per cent of this, or 5.75 per cent of pre-tax profit.
The hospitality sector has been putting increasing pressure on the Chancellor to change the policy.
Over 200 of the UK’s biggest hospitality businesses signed a letter to the Chancellor earlier this week warning that the additional tax bill will force some businesses into liquidation and that others will have to drastically reduce their headcount and slash investment.
“The Chancellor’s announcement of an increase to employers’ National Insurance contributions is a big blow to UK businesses of all sizes who are already grappling with a range of escalating costs,” Vipul Sheth, MD of accountancy specialist Advancetrack, said earlier this week.
Fuller’s also announced an increase in revenue of 2.8 per cent in the 26 weeks ended September 26, from £188.8m to £194.1m, and an increase in adjusted profit before tax of 17 per cent, from £14.5m to £17.6m.
Like-for-like sales were up 5.2 per cent.
Enemy called the results “the culmination of three years hard work post-Covid”.