British hospitality businesses are entering survival mode following a staggering £3 billion surge in tax and wage costs imposed by last week’s budget, industry leaders have warned. The severity of the situation became apparent during a high-level meeting between sector leaders and Business Secretary Jonathan Reynolds.
The tax implications for part-time workers have risen dramatically, with employers facing a 73 per cent increase in costs due to revised national insurance contribution thresholds. Morrisons’ Chief Executive Rami Baitiéh characterised the budget’s impact as “an avalanche of costs” set to hit businesses in the coming year.
Greene King’s chief executive Nick Mackenzie revealed the national insurance modifications would deliver “a £20 million shock” to their operations. The collective burden on the sector is substantial, with tax increases adding more than £1 driving up business costs by £1 billion, while the minimum wage rise introduces an additional £1.9 billion in expenses.
The immediate impact is evident in major industry players’ responses. Fuller’s pub group has announced plans to slash their annual investment from £60 million to £30 million. Young’s pubs are considering similar dramatic cuts to their investment programmes, with chief executive Simon Dodd describing the combination of national insurance changes and wage increases as a “triple whammy.”
Industry body Hospitality UK projects that businesses will need to implement price increases of 6 to 8 per cent to offset rising costs. However, recognising this as unsustainable, many firms are instead planning to reduce investment, cut working hours, and decrease employment levels.
The Department of Business and Trade maintains that the government will work in partnership with businesses to deliver economic growth. Nevertheless, the stark reality facing the hospitality sector suggests a challenging period ahead as companies prioritise survival over expansion and investment.
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