The hike in employer National Insurance contribution (NICs), which was revealed by Chancellor Rachel Reeves in her Budget, will place a “significant burden” on historic brewer, pub and hotel owner, Daniel Thwaites, the company has said.
The Lancashire-headquartered group added that the increase, together with the rise in the National Living Wage, “make it less attractive to employ people and will reduce investment”.
Thwaites added that the tax rises will hit “working people through either lower pay awards or reduced employment”.
The business also said that the government’s decision to reduced business rates relief for hospitality from 75 per cent to 40 per cent hits what has been a “lifeline for pubs that are already overtaxed, which for some will be the final straw”.
Thwaites also said that the “much vaunted” reduction in the price of a pint by 1p is “irrelevant against the context of these new measures”.
The group, which has 200 tenanted pubs and hotels across Cumbria, the Midlands, North Wales and Yorkshire, has also revealed its turnover increased from £60.3m to £63.5m in the six months to 30 September, 2024, compared to the same period in 2023. However, its pre-tax profit dipped from £8.5m to £7.6m.
In its latest full-year, Thwaites achieved a turnover of £115.5m and a pre-tax profit of £9.1m.
Employer National Insurance hike a ‘significant and unwelcome’ headwind
In a statement, Thwaites said: “Since the summer there has been a marked decline in confidence, both for consumers and businesses. This has been particularly noticeable in our hotels business which has experienced a slowing in sales.
“One of the factors at play has been the intense speculation in relation to the new government’s first Budget; now this has been delivered it has removed some of the uncertainty.
“With the measures announced, it is disappointing that already the Chancellor has indicated that additional tax rises will be needed in her future Budgets to meet the government’s spending plans.
“Consumer prices inflation is currently running at about 1.7 per cent, so it was extremely disappointing that the government has decided to increase the National Living Wage by 6.7 per cent and the young person’s rate by 16 per cent, which disproportionately affects hospitality.
“In addition, the increase in employers National Insurance contributions, through both an increase in the rate, and lowering the threshold at which it is paid adds a significant burden on the company.
“There is limited scope for price increases in the current economic environment, so collectively these policies force us to think differently to consider ways to mitigate these taxes.
“They make it less attractive to employ people and will reduce investment. Ultimately, they will be borne by working people through either lower pay awards or reduced employment.
“Despite intense lobbying, the government has also reduced business rates relief for hospitality from 75 per cent to 40 per cent, which has been a lifeline for pubs that are already overtaxed, which for some will be the final straw.
“The much vaunted reduction in the price of a pint by 1p is irrelevant against the context of these new measures.
“These changes will come in from the start of our next financial year, and whilst the profitability of the company is currently holding up, significant and unwelcome new headwinds have been introduced”.
Major employers reveal Budget impact
The comments from Thwaites come as the government comes under increasing pressure to revisit its hikes to employer national insurance contributions and the minimum wage.
In recent days, a number of the UK’s largest employers have voiced concerns about the impact of the changes on their costs and operations.
Over 200 of the UK’s biggest hospitality businesses signed a letter to the Chancellor at the weekend warning that the additional tax bill will force some businesses into liquidation and that others will have to drastically reduce their headcount and slash investment in order to meet the additional costs imposed by Labour’s first Budget.
The open letter to Rachel Reeves, signed by Premier Inn-owner Whitbread, Wagamama operator The Restaurant Group and pub giant Marston’s, also comes as several of the UK’s major supermarkets have begun to reveal the true cost of the employer national insurance contributions rise to their business.
Tesco, the UK’s largest private employer, faces a £1bn increase to its national insurance bill over the course of this parliament, according to Morgan Stanley analysis published at the weekend.
Rival supermarkets Sainsbury’s and Asda both revealed last week that they were expecting to pay an additional £140m and £100m respectively in employer NICs.