One in three hospitality businesses losing money after Reeves tax raid

Telegraph

02-06-2025

One in three hospitality businesses, including restaurants and pubs, are operating at a loss in the wake of Rachel Reeves's tax raids, industry leaders have warned.
A survey commissioned by the main trade bodies found that April's increase in employers' National Insurance had a devastating impact on the sector.
UKHospitality said the Chancellor's decisions had added an extra £3.4 billion to firms' costs, meaning one-third were now losing money. Before the change, 11 per cent had said they were losing money.
It warned that the effects were so dramatic that Ms Reeves' target of bringing the employment level up to 80 per cent was 'doomed to fail'.
The survey, for UKHospitality, the British Institute of Innkeeping, the British Beer and Pub Association and Hospitality Ulster, also found that six in 10 firms have had to cut jobs, while 63 per cent have reduced the number of hours available to staff.
In a joint statement, the trade bodies said: 'The Government seems to be setting itself up to miss its own targets with these most recent cost hikes for the hospitality sector.
'Hospitality is vital to the UK economy but is under threat from ongoing costs rises, which the April increases have only exacerbated. Jobs are being lost, livelihoods under threat, communities set to lose precious assets, and consumers are experiencing price rises when wallets are already feeling the pinch.
'The Government must act urgently to mitigate for the changes to Employer NICs and also deliver on its promise of root and branch business rates reform.
'The overall tax burden on our sector must be reduced, including consideration of the long-standing ask of a VAT cut for the sector, so the hospitality industry can return to investment, job creation, and growth in communities the length and breadth of the country.'
In last year's Budget, Ms Reeves increased the employer rate of National Insurance by 1.2 per cent to 15 per cent, adding £1 billion in costs for the hospitality industry.
At the same time, increases in the minimum wage imposed £1.9 billion in costs. Another £500 million came from reduced business rates relief.
The survey, undertaken in May, found that more than half of operators had been forced to cancel investment. Some 76 per cent said they had had to increase prices, and there was also a knock-on effect on consumers and the wider economy.
Operators called for a reversal of the employer National Insurance rise, a VAT reduction for hospitality, and reforms to business rates.
Ms Reeves decided to increase NI on employers last October, so that it did not break the letter of Labour's manifesto commitment not to increase taxes on working people.
As well as the increase in the rate, the threshold at which it comes in has also fallen from earnings of £9,100 a year to £5,000. The Chancellor admitted the increase would be difficult for many firms to absorb.
Last week, Tesco announced it would close some stores an hour early - 10pm instead of 11pm - after being hit by the rise in NI.