UKHospitality (UKH) chief executive Kate Nicholls and the trade body’s board members, including the bosses of Fuller’s, Stonegate Group and Whitbread, have written to the Chancellor, outlining the ‘unprecedented damage’ the rise in employment costs will inflict on the sector.
More than 200 sector voices signed the letter, which warned the £3.4bn cost hikes will cause small business closures within a year, businesses to reconsider investment plans, jobs to be drastically cut, hours to be reduced.
The changes to national insurance contributions (NICs) announced at the Budget included the lowering of the threshold at which employer NICs is paid to £5,000 – a move which has been criticised.
UKH estimated this will bring in thousands of part-time staff that were not affected previously and the move will disproportionately impact the sector.
Mitigation suggestions
Therefore, the trade body has suggested two measures to mitigate the impact – create a new employer NICs band from £5,000 to £9,000 with a lower rate of 5%.
Alternatively, it suggested the Government implement an exemption for lower band taxpayers working fewer than 20 hours a week, targeting support for part-time and lower paid workers.
The letter said: “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 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.”
Lost growth potential
It also warned contract caterers would struggle to meet important public sector catering contracts for schools, hospitals and prisons.
The letter added: “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 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 you consider measure to protect businesses who employ lower earners. We understand these proposals come at an immediate financial cost but we are absolutely firm in our belief the lost growth potential, which would result from inaction, would be substantially more expensive, for the economy, for society and for the public finances.”
