A third of pubs, bars, restaurants and hotels are losing money and at risk of failure because of the government’s recent tax rises, the industry has warned.
According to a new industry survey, one in three hospitality businesses are operating at a loss following £3.4billion of additional costs that hit the sector in April.
The survey conducted by UKHospitality, the British Beer & Pub Association, the British Institute of Innkeeping and Hospitality Ulster, says the 11% increase is the steepest quarterly rise recorded by the industry in recent years.
Changes to employer national insurance contributions (NICs), has meant that six in 10 operators have already been forced to cut jobs and reduce staff hours. 76% of businesses have increased prices in an attempt to stay afloat.
Hospitality businesses were hit hard by the changes to NICs, which rose from 13.8% to 15% earlier this year, alongside changes to business rates. The employer NIC threshold was also lowered from £9,100 to £5,000.
The government’s latest NIC rise is expected to raise more than £25billion for the Treasury, but operators argue that it threatens the future of a sector that supports close to 940,000 jobs and adds £26.2billion to the UK economy each year.
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 cost rises, which the April increases have only exacerbated. Jobs are being lost, livelihoods under threat, communities are set to lose precious assets and consumers are experiencing price rises when wallets are already feeling the pinch.”
The groups are calling for a reversal of the NIC changes, faster business rates reform and a reduction in VAT for hospitality.
“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,” they said.