The UK hospitality industry has shed 69,000 jobs since chancellor Rachel Reeves’s rise in employers’ national insurance contributions took effect – a stark reversal from the 18,000 roles created in the same period last year under the previous government.
The figures, sourced from the Office for National Statistics, or ONS, mark the steepest peacetime job losses for the sector since records began outside the pandemic, and have triggered warnings that the government’s tax policies are putting a vital British industry at risk.
The hospitality industry has written a letter to the prime minister about the stark tax increases this morning.
Andrew Griffith, shadow business secretary, said in response: « Hospitality is the canary in the mine for the whole private sector ».
« Small business deaths don’t make national headlines but the lights are going out in high streets, pubs, and restaurants across Britain under this socialist government. »
Tax policy blamed for job losses
The job cuts follow Reeves’ Autumn Budget announcement last year of a £40bn tax package, including £25bn from hikes to employer NICs, which came into force in April.
The rise pushed the rate from 13.8 per cent to 15 per cent, while the salary threshold was lowered to £5,000 – capturing the vast majority of part-time workers in hospitality.
UKHospitality chief executive Kate Nicholls has warned that if current trends continue, up to 200,000 workers, nearly six per cent of the sector’s 3.5 million-strong workforce, could lose their jobs within the first full year of the policy.
“Unless there is a change of tack by the government, we are looking at 150,000 to 200,000 fewer workers in hospitality,” she said.
Business confidence dives as staffing cuts widen
Fresh research from accountancy firm S&W has revealed that more than half of UK businesses are already cutting staff to offset rising employment costs, with a third planning further reductions this summer.
Hiring freezes and reduced hours are now widespread, particularly across pubs, restaurants and hotels.
S&W partner Claire Burden said: “Given that salaries represent a considerable proportion of the overall cost base for most businesses, it is to be expected that many are looking closely at headcounts in response to the increased national insurance costs.”
The same study found that 60 per cent of firms were fast-tracking automation and technology investment to replace labour – a shift likely contributing to the broader slump in job vacancies and worsening the skills gap.
Pressure mounts on Starmer as MPs sound alarm
The government came under sustained pressure in the House of Commons on Monday, as MPs from all major parties criticised what they described as “insurmountable burdens” placed on the hospitality sector.
Liberal Democrat MP Alistair Carmichael warned: “Hospitality is being taxed out of existence, and that is a political choice we need to change”.
Conservative MP Andrew Griffith described the approach as “hostile” and warned it was putting at risk young people’s first step on the career ladder.
“Britain’s proud record of innovation and business success is being thrown away thanks to that all knee-jerk Labour instinct of taxing success,” he said.
Industry calls for targeted NIC relief and reform
In a letter to the prime minister, Nicholls called the tax changes “socially regressive” and “unsustainable”, urging the government to extend the existing NIC exemption for under 21s to workers under 30 and those re-entering the workforce after long-term unemployment.
Such a policy, she argued, would encourage firms to hire again and reduce benefit dependency – ultimately being cost- neutral for the Treasury.
UKHospitality also reported that 70 per cent of businesses were now cutting staff.
One third have reduced trading hours, with many pubs closing earlier and restaurants no longer opening before lunch.
Fiscal headwinds could prompt further tax moves
Reeves is now facing a £5bn hole in the public finances after Labour’s U-turn on welfare reforms, with leading economists warning that tax hikes may have to go further.
Paul Johnson, director of the Institute for Fiscal Studies, has said changes to income tax, national insurance and VAT may be inevitable.
Analysts at Deutsche Bank have warned that falling employment and sluggish growth could push borrowing even higher in the second half of the year.
HSBC has flagged the risk of a “doom loop” of higher taxes and weak growth, with speculation mounting that the Chancellor may consider raising the top rate of dividend tax or increasing the surcharge on banks.
A Treasury spokesperson defended the NIC changes, saying: “Economic activity is at a record high and 384,000 more people are in employment since last summer… we’ve shielded 250,000 retail, hospitality and leisure properties from full business rates.”
