The cost of eating and drinking out may have to rise as the hospitality industry struggles to cope with higher national insurance contributions and minimum wage levels, ministers have been warned.
Pubs, restaurants and bar owners say they will have to pass the extra costs on to customers, and argue that employment could be stifled.
Additionally, the night-time economy could be “devastated” by Rachel Reeves’s plans, businesses claim. They warned the Chancellor not to “rebalance the budget off the back of the high street”.
UK Hospitality, which represents businesses, is urging the Government to maintain a permanently reduced business rate. It also called for the proposed rise in employer national insurance contributions (Nics) to apply to higher earners only.
Failing to do this would reduce the number of jobs and stop growth in the sector, Allen Simpson, deputy CEO of UK Hospitality, told i.
He also sounded a warning over the end of the business rates relief scheme for the hospitality sector – which gives firms a 75 per cent discount on their bill, up to a limit of £110,000.
It was introduced during the Covid-19 pandemic but is due to finish in April. This would result in a “cliff edge” for hospitality businesses and would see rates rise from £11,000 to £44,000 for the average pub, Mr Simpson warned.
He added that the expected increase in Nics should exempt “lower earners”, such as those on minimum wage.
He said the impact of raising Nics would be to “reduce the number of jobs created in the future,” which would suffocate growth in the sector.
The Chancellor is trying to plug a £22bn “black hole’” she claims has been left by the previous government, but she has also pledged not to increase taxes on “working people”, ruling out rises to income tax, VAT and NI.
But the NI that businesses pay for their employees is set to rise by one or two per cent in Wednesday’s Budget – sparking the hospitality industry’s warnings.
Patrick Fitzsimmons, owner and landlord of the Faltering Fullback – a pub in Finsbury Park, north London – warned that tax rises, combined with higher energy costs and inflationary pressures, would mean higher prices for customers.
“We’re very lucky in that we’ve been busy and trade has been good, but the external factors like never ending inflation have been challenging,” he said. “We hoped a Labour Government would back and help small businesses, given we’re the hub of many communities.
“Costs of producing beer have gone up, energy prices are bigger, if we get Nics increases and higher wages we can’t keep absorbing them, the costs will have to be passed on to customers. We know those customers have been hit for six, so of course we don’t want to do that.”
He said proposals for a smoking ban in beer gardens was “another challenge” down the line for pubs. And he called for “clarity” over business rates.
Alison Boutoille, Founder of CityStack, a network of independent pubs, added that increases to Nics would just “add more strain” to an already-squeezed industry.
“Independent pubs have faced countless challenges since the pandemic: reduced footfall, rising inflation, and a post-Brexit staff shortage exacerbated by soaring London rents, which has made it even harder for employees to find housing,” he said.
“An increase in NI tax would only add more strain to an already challenging economic situation for small businesses like publicans.”
The Night Time Industries Association said proposed tax rises threatened “to devastate the night-time economy”.
Michael Kill, its CEO, said: “For pubs, clubs and late-night venues, a combination of rising Nics costs, potential minimum wage increases, and ongoing uncertainty around rates relief, could push already fragile businesses to the brink.
“With profit margins non-existent, these measures risk widespread closures, significant job losses, and a severe weakening of the night-time economy’s crucial role in the UK’s social and cultural fabric.”
Mr Simpson added that the Government’s focus on “limited” industries to create economic growth overlooked the fact that hospitality was an industry offering employment to people from all educational backgrounds and in all parts of the country.
Increases in taxes, combined with new laws to improve employment rights, would put undue pressure on the sector, he said, adding: “We can’t absorb big tax rises at the same time. I have enormous sympathy for the challenge the Chancellor faces, but you can’t rebalance the budget off the back of the high street.”