The CEO of pub chain Fuller, Smith and Turner, Michael Turner, has issued a stark warning about the impact of recent tax hikes on the hospitality sector, cautioning that it will fuel inflation and push businesses "to the wall".
Turner, who chairs the London-listed company known as Fuller's, expressed concern that the alterations to employer's national insurance contributions (NICs) outlined in the budget "will cause particular pain" and were the result of the Chancellor's ill-advised pledge not to raise taxes on individuals, as reported by .
Chancellor Rachel Reeves raised the amount employers must contribute to NICs by 1.2 per cent, while also reducing the wage threshold at which employers must start paying the tax from £9,100 to £5,000.
This change will predominantly impact sectors that are heavily dependent on labour, such as hospitality and agriculture. The hospitality industry will be further hit by the threshold alteration, as many businesses in this sector rely significantly on part-time workers who were previously exempt from the tax.
Turner argued that "the Chancellor's actions are a direct attack on those labour-intensive industries that are the lifeblood of our economy, whilst leaving the large City institutions, that can afford to pay their share, almost completely untouched."
"The unintended consequences of these actions will be to drive inflation higher, put pressure on wages, and will drive many businesses to the wall," Turner warned, expressing hope that the government would reconsider its decisions.
Following the announcement of a rise in employers' NICs, Reeves revealed an increase in the National Minimum Wage by 6.7 per cent.
Chief Executive Simon Emeny expressed concerns on BBC Radio 4 this morning, stating: "We still haven't fully recovered profits post-Covid", and highlighted that "the cost increases that were announced two weeks ago in the budget will impact significantly across the sector."
Emeny described the change as "a fresh challenge we'll need to adjust our business for" and noted it would impose an additional £3.5bn in costs for the hospitality industry and £8m for Fuller's specifically.
He remarked on the budget, saying, "It doesn't feel like a budget for working people, it doesn't feel like a budget for growth."
Fuller’s: Hospitality has been “plundered” for tax
The sentiment was echoed with Fuller's comment that hospitality has been "plundered" for tax, with Turner adding that it seems like "history repeating itself".
Research by the British Retail Consortium indicates that retail contributes 7.4 per cent of all business taxes amounting to £33bn which is disproportionately high at 1.5 times its share of the economy, equating to five per cent of GDP.
The tax burden represents 55 per cent of the industry's pre-tax profit, the highest ratio among major business sectors, with business rates accounting for 11 per cent of this figure, or 5.75 per cent of pre-tax profit.
There is growing pressure from the hospitality sector on the Chancellor to reconsider the policy.
Over 200 leading figures in the Ƶ's hospitality sector have penned a letter to the Chancellor, cautioning that the looming additional tax burden might drive certain establishments into liquidation while others could face the stark choice of drastically reducing their workforce and cutting back on investment.
"The Chancellor's announcement of an increase to employers' National Insurance contributions is a big blow to Ƶ businesses of all sizes who are already grappling with a range of escalating costs," asserted Vipul Sheth, the Managing Director of accountancy expert Advancetrack, earlier this week.
In further industry news, Fuller's reported a 2.8 per cent climb in revenue for the 26 weeks up to September 26, witnessing a rise from £188.8m to £194.1m, along with a step-up in adjusted pre-tax profits by 17 per cent, moving from £14.5m to £17.6m.
The company also enjoyed a like-for-like sales uplift of 5.2 per cent.
Referring to the achievements, Emeny labelled the results "the culmination of three years hard work post-Covid".
