During the Autumn Budget on Wednesday 28 October, Chancellor John Healey confirmed the National Living Wage would rise by 3.9%, from £12.71 to £13.20 an hour, from April 2027. The National Minimum Wage for 18 to 20-year-olds will also increase by 3.9%, from £10.85 to £11.27 an hour.
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Operators told The Morning Advertiser (The MA) mounting labour costs had prompted businesses to review how they recruit and retain staff, raising concerns about the sector’s future workforce ahead of the changes coming into force.
Greedy Gordons managing director Richard Gordon said the Government should be making it easier, rather than harder, for businesses to employ people.
He estimated the company’s wage bill and associated employment costs would rise by approximately £60,000 a year from next year.
“We value our teams and want to pay them well,” he continued. “But any increase has to be financially sustainable for the businesses providing those jobs.
“Our teams deserve fair pay, and we want hospitality to offer worthwhile careers. But businesses need to be financially able to support those increases while protecting jobs.”
Gordon said rising wages, business rates, supplier prices and energy bills would also influence what pubs charge customers.
He added: “Increasing prices is a difficult decision, but we cannot continually absorb higher bills without putting the business at risk.
Pressing for change
“We cannot give up. We must keep making our voice heard, pressing for change and helping the public understand what is happening to hospitality.”
Multiple operator Tim Skinner echoed those concerns, warning higher employment costs were making it harder for businesses to offer opportunities to people starting their careers.
He told The MA: “I believe in paying people fairly, but we cannot ignore the economics of employing them.
“The Government cannot keep increasing the cost of operating a business, expect those businesses to employ more people and invest in growth, and then act surprised when prices rise, investment stops and pubs close.
“You cannot tax your way to growth by making the businesses responsible for delivering it increasingly unviable. It’s counterproductive.”
Meanwhile, Barons managing director and British Institute of Innkeeping (BII) chair Clive Price warned operators had been forced into “defence mode”, focusing on cutting costs rather than growth.
He said many pubs had already cut shifts, reduced staffing levels and opening hours, deferred pay rises for senior staff and scaled back investment.
“Employers are thinking how do I cut costs, reduce hours and get thorough the year ahead,” he continued.
Price estimated it now costs around £10,000 more per year to employ a member of staff than it did four years ago.
He added this meant young people were being “shut out of the labour market” as employers become more selective with recruitment, while needing greater productivity from existing teams.
Shifting balance
“Pubs have always been fantastic employers of young people, giving so many their first jobs and an introduction to the world of work,” the managing director continued.
“We in the industry have been happy to do this, but the balance has shifted now the minimum wage has disrupted the ‘value for money’ for employers.”
Price also pointed to the Government’s recent partnership with UKHospitality (UKH), under which hospitality businesses have pledged to provide 100,000 jobs for young people not in education, employment or training (NEETs) over three years.
He questioned the contradiction of introducing schemes to tackle youth unemployment while, in his view, Government policies were making it harder for hospitality businesses to provide those opportunities in the first place.
He added: “It beggars belief the Government have suddenly realised there are over 1m NEETs, and not made the link that hospitality was, and is still, perfectly placed to provide hundreds of thousands of jobs if they just took their foot off our throats with that excessive tax burden.”
Butcombe Group chief operating officer Jayson Perfect added the wage increase would also put further pressure on hospitality employers, particularly when it came to maintaining pay differences between junior and senior staff.
He told The MA the latest increase would create “wage compression”, meaning businesses would have to raise pay for supervisors, chefs and managers to maintain fair gaps between their salaries and those of other team members.
While Perfect welcomed the higher Small Business Rates relief threshold announced in the Budget, he warned it would not offset the combined impact of wage increases, duty costs, supplier inflation, energy bills and other property costs.
