U.K. | The hospitality industry has been hit by a GBP 3.4 billion budget hangover, with significant increases in payroll costs and business rates now taking effect.
Failure to tackle costs on hospitality businesses in the Budget means that the investment needed to deliver forecasted industry growth of six percent a year is at risk.
Almost two-thirds of the sector’s annual GBP 5.4 billion investment of growth could be diverted into paying the new payroll and business rates costs.
Increases in the national minimum wage and national living wage will see the sector’s wage bill increase by GBP 3.2 billion. The sector is reliant on its workforce, and employment costs make up over half of its operating costs, as well as GBP 40 billion in wages and employment taxes. Increases to business rates add up to GBP 224 million. The tax on property heavily penalises community-based businesses.
"We’re calling on governments to rebalance the costs that hospitality businesses pay and reduce its cost burden so they can make the investments needed to grow, creating communities in which people want to live, work and invest," said UKHospitality chief executive, Kate Nicholls.
"Every day, hospitality is serving Britain. It’s serving the nation with good food, drink and experiences, as well as contributing £140 billion in revenue, £54 billion in tax receipts and providing three and a half million people with jobs.'
UKHospitality said that the three quickest levers governments can pull are:
- Fix business rates – replace short-term solutions with a permanently reduced business rates multiplier for hospitality, leisure and high-street retail sectors at a rate of 30 pence in the pound.
- Employment costs – support businesses to introduce the record increase in the National Living Wage by temporarily reducing the rate of employer National Insurance Contributions and by setting a sustainable long term path for the minimum wage.
- VAT – reduce the rate of VAT on hospitality, leisure and tourism to 12.5 percent, returning to the effective policy during the pandemic and matching the average of continental competitors.
"All of those benefits to Britain, our lives and communities are put at risk by the £3.4bn Budget hangover hitting the sector today. Businesses can’t find £3.4 billion easily – that’s the cost of a billion cups of coffee. The money that they want to put towards investment in growth will have to be spent keeping their doors open."
To read more global news, click here.
