The move has been met with concern from the sector, amid calls for support around business rates.
According to The Times, Reeves will announce in tomorrow’s Budget that wages will increase from £11.44 to at least £12.12 an hour next year.
Operator of the Unruly Pig in Bromeswell, Suffolk Brendan Padfield highlighted the tumultuous trading environment facing the sector.
He said: “There are times where any of us in hospitality just wonder whether it is all really worth it. This week is one of those times.
“The attritional assault upon the hospitality sector just seems to continue relentlessly. [Some] 75% of pubs are not making a profit, pubs are closing at the rate of two per day, yet this Government just is piling on the pressure seemingly oblivious – Brexit, Covid, energy crisis, major economic downturn (and cutback on discretionary spending), it just goes on.
“Just when you think it can’t get much worse (when we are facing the added costs implicit in enhanced employment protection as well the changes to zero hours) along comes increased employers’ national insurance contributions."
Volatile trading conditions
Padfield added: “If that wasn’t enough, there are now yet further increases proposed to the national minimum wage. I doubt there is anyone in hospitality who thinks our hard-pressed teams don’t deserve to be paid more – they absolutely do.
“This further rise will mean the national minimum wage has risen more than 50% in five years and needs to be paid for somehow. But, when businesses have already had their margins cut to the bone, there will be no room to absorb these very significant increases in costs other than to increase prices (and thus feed inflation).
“Yet an increase in prices in such volatile trading conditions (when the public are cutting back) will undoubtedly just prove too challenging for some in our sector.
“I fear we are going to see many more casualties. Not one of the Cabinet has ever run a business. It certainly shows ‘
Trade body UKHospitality also outlined how wages have soared in recent years and called on the Government to support the industry.
Chief executive Kate Nicholls said: “The national minimum and living wage has increased 20% over the past two years and up to 40% in some age bands.
“While we expect there will be another increase this year, we would urge the Government not to implement another rise that takes the level above the stated remit of 66% of median earnings, which would put significant strain on hospitality businesses already struggling with cost challenges."
Passionate businesses
“Businesses are passionate about looking after their staff and paying them well but [the] tax burden needs become more sustainable if they are expected to absorb increases year-after-year," she said.
“That starts with introducing a lower, permanent and universal level of business rates for hospitality, to avoid an additional billion-pound tax bill hitting the sector next April.”
Previously, industry chiefs warned rising wage costs were threatening to become the biggest challenges for pub operators.
Liberation Group CEO Jonathan Lawson called for a stronger challenge to NLW increases at The Morning Advertiser’s MA Leaders Club conference earlier this month (October).
He said: ““We love to see people come through our business and progress and that’s exactly what we are seeing.
“But if we see another three years of inflation and NLW increases like we have the past three years, it is going to be really tough, and our sector needs to change our tone on this and be less nervous about calling it out.
“We need to stop focusing on things we have no chance in getting. We need to stop talking about VAT [cuts], because frankly we aren’t going to get it. Whereas NLW is needed by us and the Bank of England to bring the Government back in line.”
