Britain’s hospitality leaders face a crisis of confidence as tax rises bite

Optimism in Britain’s hospitality sector has continued to slip, with only a third of leaders confident about the next year of trading as cost pressures mount.

It’s the fifth month in a row that the confidence of Britain’s hospitality leaders has fallen, according to CGA by NIQ’s latest Business Confidence Survey.

Morale is now at its lowest point since late 2022, and is at its second lowest since the Covid lockdowns of 2020.

In fact, the head of the Night Time Industries Association (NTIA), Michael Kill, has said that the climate heading into this year was “more concerning than anything we saw during the pandemic”.

It doesn’t help that profitability has already been eroded by fast-rising labour costs, with 99 per cent of businesses reporting that their wage bill has risen in the last year.

Despite solid trading for many hospitality groups over Christmas, only a third of firms said their profits increased over the period.

The strain on costs is set to worsen from April, when employers face extra labour costs. Research from UKHospitality has found that changes to national insurance contributions (NICs) will add £2,500 onto the cost of employing the average worker.

Earlier this week, a third of UK hospitality businesses said they will be forced to cut employment as a result of a higher tax bill.

One in ten have to close at least one site and just under two thirds will cancel investment, according to UKHospitality.

“Pubs, brewers and hospitality venues will be forced to make painful decisions to weather these new costs, which will have damaging impacts on businesses, jobs and communities,” the UK’s three core hospitality trade bodies – UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster – said in a joint statement.

Last week, City broker Peel Hunt warned that British pub culture is at risk due to structural pressures and tax hikes.

Hospitality was the biggest driver of economic growth in both November and December, but tax rises in the October budget “halted and reversed a year-long upgrade cycle”, Peel Hunt said.

Hospitality and retail companies alike have been urging the Government to phase in its changes to employer’s national insurance (NICs), and Baroness Noakes proposed a bill of the same nature earlier this year.

The bill, which has also been backed by M&S boos Lord Wolfson, is at the committee stage in the Lords – although analysts have said it is unlikely to pass.