Hospitality bosses warn Budget tax rises will force closures

Top pub and restaurant bosses have warned the chancellor that tax rises in last month’s Budget will “unquestionably” cause closures and job losses.

In a letter, more than 200 signatories have said the hospitality industry is disproportionately impacted by an “unsustainable” hike in the amount employers pay in National Insurance Contributions (NICs).

It adds that businesses have “no capacity to pass the costs onto customers”, which would instead lead to job cuts and closures of smaller firms.

Chancellor Rachel Reeves has said that her National Insurance changes for businesses will generate £25bn, which would aid funding of public services, such as the NHS.

From April, the rate employers pay in National Insurance will rise from 13.8% to 15%, and the threshold at which they start paying the tax on each employee’s salary will be reduced from £9,100 per year to £5,000.

Signatories of the letter include Kate Nicholls, chief executive of UKHospitality, the bosses of pub firms Fuller’s and Stonegate Group, and Premier Inn’s owner, Whitbread.

They are supported by a further 209 businesses, together employing tens of thousands of people across the UK.

According to the letter, the cost increases will cause businesses to reconsider investment plans, jobs to be “drastically” cut and hours to be reduced for workers.

The signatories are calling for measures to “protect businesses who employ low earners” as a result.

The letter also suggests that changes in the NICs threshold are “regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon”.

It calls on the government to consider one of two measures to mitigate the impact on businesses, accepting they come at “an immediate financial cost” but that “lost growth potential” from inaction “would be substantially more expensive”.

Suggested measures are a new employer NICs band which would apply between £5,000 and £9,100 at a lower rate of 5%, or implementing an exemption for taxpayers working fewer than 20 hours per week.

The changes set out in the Budget are, however, predicted to raise some £25bn a year, making it one of the biggest single tax-raising measures in history.

The chancellor has previously said that she was not immune to “criticism” over the move, but has argued that it will put public finances on a “firm footing”.