Two-thirds of hospitality businesses are planning to cut jobs as a result of “suffocating” costs imposed by government, as new business rates and higher wage bills come into force.
Many pubs, restaurants and hotel companies will see their costs increase significantly from 1 April after Rachel Reeves’s changes to business rates and an increase in minimum wage thresholds announced at the chancellor’s November budget.
An industry-wide survey of 20,000 hospitality businesses has found that as a direct result of the cost increases, 64% of firms plan to cut jobs, 42% intend to reduce trading hours and one in seven will be forced to close.
“Hospitality businesses enter April facing billions of pounds in additional costs, which will force many to make heartbreaking decisions,” said bodies including UKHospitality and the British Beer and Pub Association, in a joint statement. “Hospitality’s tax burden – the highest in the economy – is suffocating the sector. The impact is clear: more lost jobs, less investment and business closures.”
UKHospitality has estimated that increases to the “national living wage” and national minimum wage will result in an extra £1.4bn in costs for the sector.
While there is no estimate of the overall cost of changes to business rates, a spokesperson said he expected that most members would pay more, with the average hotel in England facing an increase of £28,900 more this year (up 30%), while the average restaurant can expect a 15% increase worth £1,800.
This is despite the government announcing a support package worth more than £80m a year for pubs and live music venues, after a fierce backlash against the impact of the overhaul of business rates.
The trade bodies, which also include the British Institute of Innkeeping and Hospitality Ulster, also warned that the conflict in the Middle East will accelerate the impact of rising wage and tax costs with energy bills expected to rise steeply.
Separate figures published by the Institute for Public Policy on Wednesday showed that the UK has the second-lowest level of business investment by private companies among the G7 group of countries.
The thinktank estimates that UK companies invest the equivalent of 11.1% of GDP, well behind countries such as Japan at 18.2%, and European nations including France, at 12.7%, and Germany, at 12%.
The economic shock wave caused by the war in the Middle East has pushed economic confidence to an all-time low, according to new figures from the Institute of Directors (IoD).
The IoD’s Economic Confidence Index, which measures how optimistic business leaders feel about the prospects for the UK economy, fell to its lowest ever score of -76 in March. The IoD’s reading in February was -63.
Among business directors, the biggest drivers of cost increases over the next 12 months were listed as labour bills, supply chain inflation and energy.
“The outbreak of conflict in the Middle East has driven down the confidence of business leaders to a new record low,” said Anna Leach, chief economist at the IoD. “The government is right to be alert to the risks of another cost shock to the economy.”
