UKHospitality warns of ‘significant’ job cuts

The board members of UKHospitality have expressed their concerns to chancellor Rachel Reeves regarding the potential harm that rising employment costs may inflict on the sector.

Kate Nicholls, the chief executive of UKHospitality, along with board members including the leaders of Fuller’s, Stonegate Group, and Whitbread, have written to the chancellor.

In the letter – supported by a further 209 hospitality businesses – they detailed the effects that an additional £3.4 billion (US$4.4bn) in costs facing the hospitality sector in April will have.

The appeal highlights potential consequences of the proposed budget, such as small business closures within a year, businesses re-evaluating investment plans, significant job cuts, and reduced hours for team members.

Concerns also include contract caterers having difficulty fulfilling key public sector catering contracts for schools, hospitals, and prisons.

According to the trade body, hospitality is disproportionately affected by the changes to employer National Insurance Contributions (NICs).

Lowering the threshold at which employer NICs are paid to £5,000 (US$6,450) will attract thousands of part-time staff who were previously never affected.

The signatories have proposed two measures to mitigate the impact: create a new employer NICs band from £5,000 to £9,100 (US$6,450-US$11,740) with a lower rate of 5% or implement an exemption for lower band taxpayers working fewer than 20 hours per week, targeting support for part-time and lower-paid workers.

In addition, in the autumn budget the chancellor outlined raised business taxes and spirits duty, effective from February 2025. Her plans have been described as a 'betrayal' for Scotch whisky and a ‘blow’ for hospitality.

The letter

Signed by 14 UKHospitality board members and 209 hospitality businesses, the letter states: “The changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon. Unquestionably they will lead to business closures and job losses within a year.

“The threshold change brings many team members into employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.

“There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8%, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more. Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.

“Contract catering, a significant part of our sector, would struggle to meet important public sector catering contracts for schools, hospitals and prisons.

“Without action, many businesses will be forced to reconsider their growth plans, and many smaller venues may be at risk of closure, risking future job creation in communities up and down the country.

“We know you are determined to ensure that growth is available to all. Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.

“We therefore ask that you consider measures to protect businesses who employ lower earners. We understand that these proposals come at an immediate financial cost, but we are absolutely firm in our belief that the lost growth potential which would result from inaction would be substantially more expensive, for the economy, for society and for the public finances.”

UKHospitality represents more than 130,000 venues, including pubs, bars, restaurants, hotels, indoor leisure facilities, and contract catering.