Tax increases announced by Labour to tackle a hole in the public finances have led to price increases and job cuts throughout the hospitality sector, say bosses, as they called for help from the Chancellor
Nearly eight out of 10 pubs, restaurants and others have upped prices as a direct result of government triggered cost increases, research has revealed.
More than half of hospitality firms questioned said they had also cut staff numbers since April’s increase in employers’ national insurance and the minimum wage. Labour Chancellor Rachel Reeves insisted tax increases were needed to try to plug a hole in the public finances left by the Tories.
The results come as trade bodies joined forces to urge Labour to ease the pressure on the sector, amid fears of worse to come. Industry chiefs say April’s increases have added £3.4billion a year to costs, and resulted in 84,000 jobs being lost since last year’s autumn Budget.
The British Institute of Innkeeping, the British Beer & Pub Association, UKHospitality and Hospitality Ulster came together to make a fresh plea.
In a joint statement, they said: “This shocking data reinforces the urgent need for government to recognise the incredible pressure hospitality businesses have been put under, particularly since April, and illustrates why it should come forward with measures to support this vital sector at the Budget.
“Unsustainable tax increases are squeezing businesses, stifling growth and investment, and threatening local employment, especially for young people. It is forcing businesses across the sector to make impossible decisions to cut jobs, put up prices, reduce opening hours and sadly limit the support they desperately want to give their communities.
“Hospitality is united in which measures will reverse this trend and drive growth: a reduction in VAT for hospitality, changes to employer NICs and permanently lower business rates for the sector. Now is the time to act and back a vital British sector that supports the economy, jobs, and local communities. We urge the Government to do so at the Budget this autumn.”
It follows recent figures showing nearly five pubs were lost for good across Britain every week in the first half of this year, with more than 600 standing empty long term. It takes the number of pubs that have closed since 2016 to almost 5,000, according to data from the Campaign for Real Ale (Camra).
There have also been warning about the impact of tax rises on the high street too. The number of high street firms going bust is on track to surge by more than a quarter this year, experts have warned.
The latest casualty is Claire’s Accessories, which has gone into administration, threatening more than 2,000 job losses. Bargain chain Poundland has also announced a number of store closures.
Industry experts Kroll said: “Our data suggests that at current levels, there will be a 25% increase in retail failures year-on-year.”
Latest data also suggests a rise in private schools going under after the government added VAT to fees.
However, figures from the Insolvency Service showed only a small rise in business failures despite tax rises and the weak state of the economy.
Official data showed there were 2,081 company insolvencies in England and Wales in July, edging up by 1% compared with June. Experts said firms are being challenged by “relentless uncertainty” in the global economic environment.
Simon Edel, UK turnaround and restructuring strategy partner at EY-Parthenon, said: “Many businesses are also contending with higher costs including recent increases to employer national insurance contributions and the national living wage.
“With interest rates still relatively high – alongside significant working capital demands and a constrained credit environment – liquidity pressures are intensifying for more UK companies. This is causing more businesses to call time.”
A government spokesperson said: “Our Plan for Change recognises the vital importance of pubs, cafes and restaurants to local communities.
“That’s why we’re cutting the cost of licensing, helping more pubs, cafes and restaurants offer pavement drinks and al fresco dining and extending business relief for these businesses – on top of cutting alcohol duty on draught pints and capping corporation tax.”
The government has said small businesses will not see a rise in National Insurance Contributions (NICs) and that any rise in NICs will help pay for the NHS.
