Two-thirds of hospitality firms to cut jobs as April tax rises ‘suffocate’ sector
Two-thirds of hospitality businesses will be forced to cut jobs and one in seven will shut altogether as a direct result of “suffocating” April tax rises, leading trade bodies have found.
More than half (51 per cent) of hospitality firms will cancel investment plans and 42 per cent will reduce trading hours, according to a survey of more than 20,000 businesses.
Hospitality firms say April’s increases to minimum wage rates and the introduction of higher business rates for many firms adds to the looming burden posed by the Iran war and its impact on energy costs.
The changes to the national living wage and national minimum wage rates will add £1.4bn per year to hospitality businesses’ costs, according to a group of trade associations including UKHospitality and the British Beer and Pub Association (BBPA).
Changes to the business rates system, made at last year’s Budget, were intended to make the system fairer for hospitality and retail firms.
But revaluations of the rateable value of properties – which determines the bill paid by businesses – meant that the bills of thousands of firms will go up.
Pub landlords across the country barred Labour MPs in protest against the changes, leading to a £300m emergency relief package for pubs.
More than doubling of hotel business rates bill by 2028
But hospitality leaders say the targeted nature of this relief means hotels and restaurants face an unfair tax burden.
The new rates which come into force today constitute an average increase of £28,900, or 30 per cent, on the current average bill for hotels, according to the trade bodies.
These bills will continue to climb towards the end of the decade, with the average business rate charged to a hotel set to climb by 115 per cent by 2028/29 – an increase of £111,300.
The business rate bill for the average restaurant will rise by 15 per cent today and by 54 per cent by 2028/29, the trade associations said.
Labour’s manifesto included a pledge to reform the business rates system, and hospitality leaders are calling on the government to deliver on its promise.
Chris Grose, rating director at Hartnell Taylor Cook, told CityAM: “The Government did have proposals for reform, but there still seems little intention to revive this campaign for a revision of rates.
“They are, however, interested in kicking the can as hard as possible down the road. With a hugely successful rate of collection business rates, it’s an effective way of keeping the money coming in, especially in a world where no one really wants to cover the tab.”
Pubs and restaurants are also bracing for increases on their energy bills due to the war in Iran, with independent firms set to be hit hardest because they are less likely to have long-term fixed-price energy contracts.
Energy costs a concern before Iran war
Even before the Iran war broke out, spiking fuel prices, 93 per cent of hospitality firms said their energy costs were hampering their profitability.
The trade associations – which also include the British Institute of Innkeeping and Hospitality Ulster – are calling on the government to immediately reverse some of the tax hikes facing hospitality.
As many as 70 per cent of business leaders in the industry would refurbish and develop their sites if their tax burden fell, and 46 per cent would create new jobs.
The trade bodies said: “Yet again, hospitality businesses enter April facing billions of pounds in additional costs, which will force many to make heartbreaking decisions.
“Even before the conflict in Iran and the Middle East began, increasing energy prices were already impacting profitability and the Government should be prepared to support vulnerable businesses if they are thrown into yet another crisis.”