Nearly 80% of pubs, restaurants, and other businesses have raised prices due to government-induced cost hikes, a study has found. Over half of the surveyed hospitality establishments have reduced staff numbers following the rise in employers’ national insurance and minimum wage in April. Labour Chancellor Rachel Reeves defended the tax increases as necessary to address the financial gap left by the Tories.
Trade organizations are urging the Labour government to alleviate the strain on the sector amid concerns of further challenges. The industry reports that the April increases have added £3.4 billion annually in costs and led to 84,000 job losses since last year’s autumn Budget. Various industry bodies, including the British Institute of Innkeeping and UKHospitality, have united to request government support.
In a joint statement, the organizations emphasized the urgent need for government intervention to alleviate the immense pressure on hospitality businesses. They called for measures such as lowering VAT for hospitality, revising employer NICs, and permanently reducing business rates. The industry warns that current tax burdens are jeopardizing growth and employment opportunities, especially for young people.
Recent data reveals a concerning trend of pub closures across Britain, with approximately five pubs shutting down weekly in the first half of the year. The impact of tax hikes extends beyond hospitality, with an increase in the number of high street businesses facing insolvency. Experts predict a 25% rise in retail failures year-on-year, emphasizing the challenges posed by economic uncertainty.
Despite tax rises and economic fragility, official figures show a slight increase in business insolvencies in July compared to June. Businesses are grappling with rising costs, including recent hikes in employer national insurance contributions and the national living wage. Simon Edel, a UK restructuring expert, highlights liquidity pressures intensifying for many companies, leading to more closures.
The government reassures its commitment to supporting local businesses, emphasizing initiatives like cost-cutting on licensing, facilitating outdoor dining options, and extending relief measures. Small businesses are promised no National Insurance Contributions (NICs) increase, with any rise intended to fund the NHS. The government’s stance aims to balance economic challenges with support for vital sectors.