This significant rise is attributed to several factors, including an additional £1.9bn in wage costs, £1bn in employer national insurance contributions (NICs), and £500m due to a reduction in business rates relief from 75% to 40%.
The cost of employing staff has also seen a sharp increase. For employees aged over 21, the annual cost has risen by more than £2,500, representing a 10% increase. These increases are even more pronounced for younger workers, with an 18% rise for those under 18 and a 16% increase for those aged 18 to 20.
Seven in 10 hospitality businesses anticipate having to reduce their employment levels, which could lead to job losses and decreased income for workers.
Furthermore, a third of businesses expect to reduce their trading hours, and 15% fear they may have to close at least one of their sites.
British Beer & Pub Association CEO Emma McClarkin said: “The lack of a plan to boost the economy is alarming, especially given brewers and pubs have been buried under mountains of regulations, rates, and taxes.
“We predict this massive April cliff-edge means the sector will face an additional £70m per month, the equivalent of 5,700 jobs per month. We can expect to see pubs close at a faster rate which will risk growth and jobs and hurt the communities who rely on them.
“Our sector invests in communities and supports more than 1m jobs so if Government wants to unlock growth they must reform business rates, review the chaotic and punishing EPR fees, and phase in employment costs.”
Eye-watering costs
UKHospitality (UKH) has appealed to the Government to introduce a plan that supports the sector’s growth and job creation.
The organisation also emphasized the importance of the Treasury’s upcoming business rates reform in the autumn, urging for the maximum possible discount for hospitality businesses.
UKH chief executive Kate Nicholls said: “The costs hitting hospitality this month are eye-watering, and the impacts it will have on businesses, teams and communities are stark.
“We’ve already seen a chilling effect on investment plans and job creation – all of which have been put on hold or shelved.
“As costs begin to bite, we’ll see venues having to tighten their belt even further through restricting trading hours or, in a worst-case scenario, cutting jobs.
“None of this helps the Government’s ambitions to drive growth or get people back into work. It needs sectors like hospitality to achieve both of those goals, but with disjointed tax and welfare policies, that is looking more difficult than ever.”
No silver bullet
She added: “Hospitality has the ability to generate socially productive growth and create jobs for everyone, everywhere, but this level of cost ties our hands behind our back.
“I urge the Government to work with us to bring forward a plan for hospitality that addresses these issues and backs the sector to serve Britain and create places where people want to live, work and invest.”
British Institute of Innkeeping CEO Steve Alton said the trade body’s members had been clear on the impact the combined costs will have on their businesses, especially all hitting at once.
He added: “With so many different business models and factors affecting their pub operations, there is no ‘silver bullet’ that will support all of our members.”
“...The simplest measures would be to reverse the decision to reduce the relief from 75%, and follow the lead set by several European governments by setting a permanent lower rate of VAT.
“This would protect businesses from some of the costs, but also stimulate growth in the sector, encouraging customers to come out more often to connect with friends and family.”
“With growth being so high on the agenda, our pubs can be key to unlocking the potential in every town, village and high street, all whilst providing flexible, skilled employment at a local level.”