Business chiefs warn of high street bloodbath as Labour’s £25billion tax raid comes into force
BUSINESS chiefs are warning of a bloodbath on the high street as Labour’s £25billion tax bomb comes into force today.
Chancellor Rachel Reeves’ raid on employers will lead to pub and restaurant closures and price hikes in supermarkets, they say.
Writing in today’s Sun on Sunday, Iceland boss Richard Walker tells Ms Reeves: “We do not have bottomless reserves of cash put aside in a piggy bank for the Government to draw on.”
From today, businesses have to pay a higher rate of employer National Insurance Contributions — 15 per cent, up from 13.8 per cent.
And the wage threshold at which they are paid has been lowered from £9,100 to £5,000.
Mr Walker warned there will be dire consequences for small businesses unable to absorb costs.
An increase to the National Living Wage last week also heaped pressure on companies.
It comes as British exporters were dealt a hammer blow by Donald Trump’s US trade tariffs — against a backdrop of downgraded growth forecasts and rising bills.
A new survey by the Federation of Small Businesses (FSB) found 51 per cent of firms saw their revenue fall across the first quarter of this year, and 40 per cent are braced for their revenue to decrease.
Meanwhile, the British Beer and Pub Association predicts the NICs rise will cost pubs £180million — or £4,000 per pub.
Association boss Emma McClarkin said: “With six pubs closing a week on average and making just pennies on a pint, they simply don’t have the luxury of absorbing yet more fees — including soaring employment costs.
“Government must phase in these employment costs as they will dent business which, ultimately, hurts working people.”
Shadow Chancellor Mel Stride said the NICs hike will be the “final nail in the coffin” for many British pubs.
The Tory added: “Pubs, restaurants, and low-wage sectors are facing job cuts, higher costs and reduced growth, having already been clobbered with a 140 per cent rise in business rates.
“The Chancellor’s reckless anti-business jobs tax will cost pubs £4,000 on average, threatening their future everywhere.”
Bosses are now begging Labour to water down its controversial workers’ rights plan, which will hand sweeping powers to unions and stifle business.
Shevaun Haviland, of the British Chambers of Commerce, said the Employment Rights Bill “risks unintended consequences”. And Tina McKenzie, of the FSB, said it will “hold back job creation”.
UKHospitality estimates the new NICs changes will cost the sector £1billion. And that is only part of a total £3.4billion cost to the industry from other increases this month.
If the Government wants to see hospitality lead from the front in delivering economic growth and creating jobs, it should rethink these regressive tax increases.
Kate Nicholls, chief executive of UKHospitality
It says 774,000 hospitality workers will be sucked into employer NICs for the first time — a fifth of the entire sector’s workforce.
And 70 per cent of hospitality business leaders think they will be forced to reduce employment levels.
Meanwhile, 60 per cent expect to cancel planned investment and 15 per cent believe they will have to close at least one site.
Kate Nicholls, chief executive of UKHospitality, said: “These damaging tax rises will be almost immediately felt by consumers, through an increased price of a pint or a meal, and by hard-working staff who will see hours likely reduced.
“If the Government wants to see hospitality lead from the front in delivering economic growth and creating jobs, it should rethink these regressive tax increases.”
Make UK, which represents manufacturers, did a survey that found almost half of companies are freezing recruitment and four in ten will reduce pay increases.
Around a quarter are considering redundancies and a third are delaying investment plans.
The British Retail Consortium estimates the higher National Living Wage and changes to NICs will cost the industry more than £5billion a year, rising to £7billion when a new packaging tax comes into force in October.
Consortium chief executive Helen Dickinson said: “These additional costs mean higher prices, fewer jobs and fewer stores.
“A recent survey of retail finance directors showed half were planning to reduce hours and workers as a direct result of NICs.”
Double blow
The British Chambers of Commerce found most firms surveyed are expecting to put up their prices over the next three months.
A small manufacturing firm in Essex told them tax and costs had caused it to shelve expansion plans for the next five years.
And a medium-sized construction company in Manchester said the NICs increase will add £110,000 to its pay bill this year alone.
A logistic firm in Aberdeen said the NICs increase will reduce its profits by 25 per cent.
Ms Haviland, director-general of the BCC, said: “The National Insurance rise has been an impending concern for months. From this weekend, it will become a toxic reality for millions of businesses.”
Britain’s car industry faces a double blow, with a 25 per cent US tariff on exports and a £200million-a-year NICs increase, according to Tory analysis.
They say it will leave the UK car industry £2.1billion worse off every year.
Businesses are now bracing themselves for further tax rises in the autumn amid fears the US trade tariffs have wiped out the Chancellor’s economic options.
A Government spokesman said: “We are pro-business and we know the vital importance of small businesses to our economy.
“We delivered a once-in-a-Parliament Budget that took necessary decisions on tax to stabilise the public finances.”
CARE BOSS
MIKE Padgham, executive chairman of Saint Cecilia’s Care Group, warned that NI and minimum wage hikes will pile pressure on the NHS.
He said it could lead to an increase in bed blocking — where people stay in hospital for longer due to a lack of care options.
Mike added: “This is a serious blow for a sector already reeling from years of underfunding and Covid. I expect there will be some business failures.
“If social care isn’t out there in the community then people who are medically fit for discharge and want to go back to their own home or care homes will be unable to.
“This adds to the pressure on the NHS — an unintended consequence of this policy.”
YOUNG WORKERS
YOUNG workers fear losing their jobs due to the impact of tax hikes on employers.
As well as being a student, Lucy Laycock, 18, works part time on a zero hours contract at luxury hotel Grantley Hall in North Yorkshire.
She said: “It will impact young people a lot, especially those on zero hour contracts.
“It’s really scary to think that we could be let go.”
Harry Jones, 23, who is a history student from Northumbria, works part-time at Primark. Harry said: “It makes sense that some businesses will start getting rid of staff to foot the bill. It is a worry.”
HOTEL BOSS
EDDIE Nelder, director of Choice Hotels, believes the Government’s policies are “killing tourist resorts”.
His chain has three hotels in Blackpool and two in the Lake District, employing 400 staff.
He said: “Hospitality businesses are being strangled by the Chancellor Rachel Reeves’ and Angela Rayner’s policies”.
He said Blackpool has a “forward-thinking council” and bookings are high, yet the industry is being strangled by tax hikes and NI against a backdrop of wafer thin margins and holidaymakers who can’t afford price increases.
Eddie, right, added: “It’s the same picture across seaside resorts in Britain.
“There are devastating implications for the wider economy. Reeves and Rayner say they have spoken to hundreds of businesses — well they have not spoken to me or anyone I know in Blackpool.
“The Government needs to help UK hospitality and hotels.”
HOSPITALITY BOSSES
HOSPITALITY bosses sounded the alarm on the economy — warning: “If too many businesses go down the pan we’re all in trouble.”
Jason Barr, 51, owner of Blackpool’s Retro Lounge, said he plans to open five days a week instead of seven due to the hikes but feels it is inevitable some businesses will fold.
He said: “The Government needs to remember if we work together, we win together.
“But the opposite is also the case — if too many businesses go down the pan we’re all in trouble.”
Restaurant owner Juliet May, 74, right, has been forced to cut staff numbers by two-thirds from 18 to six this summer and will close at 5pm.
The owner of Juliet’s Garden on the Isles of Scilly went on: “Everything Labour has done since they came to power has driven another nail into small businesses.”