NLW rise could put many operators ‘over the edge’

By Gary Lloyd

- Last updated on GMT

NLW announcement: (clockwise from top left) Alex Reilley, Charlie Gilkes, Kate Nicholls and Ollie Vaulkhard
NLW announcement: (clockwise from top left) Alex Reilley, Charlie Gilkes, Kate Nicholls and Ollie Vaulkhard

Related tags Legislation Finance Government Pubco + head office ukhospitality Loungers Ollie Vaulkhard Inception Group

Sector bosses fear the Government announcement on a rise in the national living wage (NLW) could put many hospitality businesses “over the edge”.

The move to increase the NLW to £11.44 in April next year, rising from its current level of £10.42 has been accompanied by the news that 21 and 22-year-olds will receive the NLW from April, bringing almost 3m more people into the wage bracket.

Loungers founder-chairman Alex Reilley said: “Lots of Tory MPs back-slapping about their inflation-busting national living wage increase. However, a reminder that it’s business that pays for this (NOT the Govt) and that the increase drives more money into the Treasury’s coffers through increased income tax, employees NI and employers’ NI receipts.

“Don’t get me wrong this is great news for millions of people (it’s more than the 2m the Govt suggests as this has a knock-on effect in the labour market). But, without targeted tax cuts [in the Autumn Statement today], this will force countess small hospitality businesses over the edge.”

Mitigate higher costs

Reilley continued: “It also only serves to pour petrol onto the embers of the inflation fire as prices will have to be increased to mitigate higher labour costs.”

Meanwhile, Vaulkhard Group director Ollie Vaulkhard argued: “[The Government] inflicts a 10% wage increase on us, but won’t give the same to their doctors, nurses, train drivers, police, etc because the treasury can’t afford it... can we?”

UKHospitality chief executive Kate Nicholls said: “This is a significant increase in the national living wage, rising 10% and 28p more than originally forecast. Such a rise will have significant knock-on impacts on costs as businesses struggle to maintain appropriate wage differentials across all of their staff, including at more experienced levels.”

Action needed to drive costs down

She continued: “If businesses are expected to deliver these wage levels, there must be action to drive down costs in other areas. The first priority on that list needs to be extending business rates relief and freezing the multiplier at the Autumn Statement.

“Without action on business rates, many businesses will not even make it to April to deliver these wage increases and jobs will be lost. That scenario benefits no one.

“In the longer term, stronger consideration needs to be given to a lower rate of VAT for hospitality to create a more sustainable tax burden for a sector that employs 3.5m people and delivers £93bn to the economy.”

Inception group founder-director Charlie Gilkes added: “[On Monday], [the Government was giving] self congratulations for denying public sector workers comparatively modest pay rises to avoid inflation then pushing huge wage increases to the private sector – better be some rabbits up the sleeve [today].”

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