Hospitality businesses across Britain are being forced to shut their doors at least one day a week as soaring wage costs and higher taxes pile pressure on the sector.
A new survey by leading trade bodies found that almost three quarters of pubs, restaurants and cafes were operating at or below 85 per cent of their normal capacity, with many cutting back opening hours in a scramble to save cash.
The closures follow the Chancellor Rachel Reeves’s decision to raise employers’ National Insurance contributions (NICs) by £25 billion and increase the minimum wage in April. While summer trading has remained strong, the rise in labour costs has tipped many operators into crisis.
The survey, carried out by the British Institute of Innkeeping, the British Beer & Pub Association, UKHospitality and Hospitality Ulster, revealed that 73 per cent of businesses had less than six months of cash reserves, while one in five had none at all.
To offset the new costs, 79 per cent of businesses said they had raised prices for customers, more than half had cut staff numbers, and many were reducing operating hours.
According to UKHospitality, Reeves’s tax raid has added £3.4 billion in costs to the sector, prompting 84,000 job losses since last year’s autumn Budget.
Andrew Griffith, the shadow business secretary, accused the Government of ignoring industry warnings: “The Government stubbornly ignored clear warnings about the jobs tax and state-imposed wage rises from hospitality businesses because Reeves thought she knew better. Now, instead of a roaring summer trade, businesses can’t afford the staff they need and are watching their cash reserves fade faster than a tan after a holiday.”
Figures from the Recruitment and Employment Confederation showed hospitality job vacancies fell by more than 22,000 in June compared with a year earlier. Wider ONS data also recorded a decline in national vacancies to 718,000 in the three months to July, down 44,000 on the previous quarter.
The British Beer & Pub Association last month warned that one pub a day is expected to shut this year, as landlords battle the combined pressures of Reeves’s tax rises, higher wages and stubbornly high energy bills.
In a joint statement, the trade bodies behind the survey said: “Unsustainable tax increases are squeezing businesses, stifling growth and investment, and threatening local employment, especially for young people. It is forcing businesses to make impossible decisions to cut jobs, put up prices, reduce opening hours and limit the support they want to give their communities.”
They called on the Government to roll back April’s NIC changes, reduce VAT, and cut business rates to safeguard jobs and investment.
A Government spokesperson defended its record, saying: “Pubs, cafes and restaurants are vital to local communities, that’s why we’re cutting the cost of licensing, helping more pubs, cafes and restaurants offer pavement drinks and al fresco dining, and extending business rates relief for these businesses – on top of cutting alcohol duty on draught pints and capping corporation tax.”
But industry leaders argue such measures fall short of tackling the structural costs created by the recent Budget, warning that without further action Britain’s hospitality sector faces a winter of closures.
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Tax raid forcing pubs and restaurants to close one day a week