Hospitality sector faces potential extinction due to excessive taxation, according to Labour.
In the face of mounting challenges for the UK's SME hospitality sector, concerns have been raised about the impact of high National Insurance Contributions (NICs) on small businesses. Since October, the sector has lost 69,000 jobs, which is triple the national average, according to recent reports. This has led MPs and industry figures to call for action to alleviate the tax burden and provide a more level playing field.
The rate of employer NICs increased from 13.8% to 15.0% in April, and the threshold for payment was lowered to include most part-time workers. These changes have been met with criticism, with MPs from across the UK warning that high taxes are causing significant problems, particularly for small businesses. Angus MacDonald, MP for Inverness, stated that the hospitality sector in rural Britain is struggling more than at any point in his lifetime.
In response, the government has announced several measures aimed at supporting the sector. One such measure is the 'draught relief' for pubs, which reduces alcohol duty by 9.2% on beers and ciders, and by 23% on spirits and wine. However, critics argue that these measures do not go far enough to address the broader issues facing the sector.
To help retain the UK's SME hospitality sector, several recommendations have been put forward. These include developing workforce strategies focused on training and retaining UK-based workers, implementing strong employee onboarding and retention programmes, leveraging government support schemes for SMEs, investing in digitalisation and skills development, and adopting marketing innovations to attract and retain customers.
The emphasis on digital transformation initiatives offers opportunities to streamline operations and enhance customer engagement. SMEs should consider training their workforce to bridge digital skills gaps to leverage these technologies effectively. Improving business resilience via personalised hospitality marketing, content marketing, and dynamic video marketing strategies can drive demand and revenues, indirectly easing financial pressures on SMEs.
However, smaller businesses may face challenges in accessing the government's support schemes due to complex application processes. Alistair Carmichael, Liberal Democrat MP for Orkney and Shetland, stated that the hospitality sector is being taxed to the point of extinction, and called for further action to be taken.
Carmichael and other MPs have emphasised that the situation in the hospitality sector is not just about statistics, but about the lives of real people. The job losses represent real people's lives, and the sector is not asking for handouts, but for a level playing field. Conservative MP Andrew Griffith expressed that the hospitality sector plays a significant role in providing the next generation with their first job opportunities.
Griffith criticised the government's approach to the hospitality sector as hostile, and called for reform of business rates and a lower rate of national insurance to help the sector. MacDonald accused the governments of the past two administrations of overtaxing the hospitality sector to the point of exhaustion.
As the UK economy continues to navigate the challenges posed by the pandemic and wider economic pressures, it is clear that the hospitality sector requires urgent support. The government's proposed measures, such as the lower business rate multiplier for retail, hospitality, and leisure properties starting from 2026/27, aim to alleviate pressure on SMEs. However, critics argue that further steps will be necessary to retain the UK's SME hospitality sector. Early action, strategic flexibility, and strong financial management, alongside workforce and digital investments, are essential to help the sector survive and grow.
- The concerns about the impact of high National Insurance Contributions (NICs) on small businesses in the UK's SME hospitality sector have led some MPs and industry figures to call for action to lower taxes and provide a more level playing field, as high taxes are causing significant problems, particularly for small businesses.
- Alistair Carmichael, Liberal Democrat MP for Orkney and Shetland, stated that the hospitality sector is being taxed to the point of extinction and called for further action to be taken, suggesting that it's not just about statistics but about the lives of real people, as the job losses represent real people's lives.
- Conservative MP Andrew Griffith criticized the government's approach to the hospitality sector as hostile, calling for reform of business rates and a lower rate of National Insurance to help the sector, arguing that the sector plays a significant role in providing the next generation with their first job opportunities.
