Higher taxes will force two-thirds of hospitality business to cut jobs
The hospitality sector will be drastically affected by higher taxes on employees’ wages, a new survey has found.
A majority of businesses will reduce employment, while over one in ten have to close at least one site and just under two thirds will cancel investment, according to UKHospitality.
The UK’s three core hospitality trade bodies – UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster – said the figures were a “clear warning”.
“Pubs, brewers and hospitality venues will be forced to make painful decisions to weather these new costs, which will have damaging impacts on businesses, jobs and communities,” they said.
Earlier research from UKHospitality has found that changes to national insurance contributions (NICs) will add £2,500 onto the cost of employing the average worker.
Hospitality was the biggest driver of economic growth in both November and December, but tax rises in the October budget “halted and reversed a year-long upgrade cycle”, Peel Hunt said.
The government will increase the amount of tax employers pay on staff wages from 13.8 per cent to 15 per cent, and reduce the threshold at which employees’ wages are eligible for the tax from £9,500 to £5,000 per year.
Baroness Noakes proposed “a phased introduction of the reductions to the secondary threshold” of NICs earlier this year. The bill, which has also been backed by M&S boos Lord Wolfson, is at the committee stage in the Lords – although analysts have said it is unlikely to pass.
“Our message to Government is to delay its changes to the employer NICs threshold and allow hospitality to continue to deliver economic growth, regenerate our high streets and support local communities,” the three trade bodies said.
“If it doesn’t act then businesses are clear that the impact on communities, employees and supply chains will be significant,” they added.