UKHospitality: ‘Budget will cause small business closures, job losses and cancelled investment’

The hospitality leaders that sit on the UKHospitality board are warning of the unprecedented damage the rise to employment costs will inflict on the sector.

Kate Nicholls, Chief Executive of UKHospitality, and UKHospitality board members, which includes the bosses of Fuller’s, Stonegate Group and Whitbread, have written to the Chancellor, supported by a further 209 hospitality businesses, to outline the impacts the additional £3.4 billion in cost facing hospitality in April will have.

They warn that the cost increases will cause:

• Small business closures within a year.
• Businesses to reconsider investment plans.
• Jobs to be drastically cut.
• Hours for team members to be reduced.
• Contract caterers to struggle to meet important public sector catering contracts for schools, hospitals and prisons.

Hospitality is disproportionately affected by the changes to employer National Insurance Contributions (NICs). The lowering of the threshold at which employer NICs is paid to £5,000 will bring in thousands of part-time staff that were previously never affected, disproportionately affecting hospitality.

The signatories have put forward to the Government two measures to mitigate this impact:

1. Create a new employer NICs band from £5,000 to £9,100 with a lower rate of 5%; or
2. Implement an exemption for lower band taxpayers working fewer than 20 hours per week, targeting support for part-time and lower paid workers.

The letter says: “The changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon. Unquestionably they will lead to business closures and job losses within a year.

“The threshold change brings many team members into employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.

“There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8%, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more. Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.

“Contract catering, a significant part of our sector, would struggle to meet important public sector catering contracts for schools, hospitals and prisons.

“Without action, many businesses will be forced to reconsider their growth plans, and many smaller venues may be at risk of closure, risking future job creation in communities up and down the country.

“We know you are determined to ensure that growth is available to all. Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.

“We therefore ask that you consider measures to protect businesses who employ lower earners. We understand that these proposals come at an immediate financial cost, but we are absolutely firm in our belief that the lost growth potential which would result from inaction would be substantially more expensive, for the economy, for society and for the public finances.”