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UK hospitality sector's confidence plummets, facing higher costs and tax pressures

2025-08-15 12:58:25 By

Confidence among Britain's hospitality sector leaders is dwindling, with only a third feeling optimistic about the forthcoming year's trading amid escalating costs.

This troubling trend marks the fifth consecutive month of declining confidence in the industry, as reported by CGA by NIQ's most recent Business Confidence Survey, as reported by City AM.

Morale has now plummeted to its bleakest point since late 2022 and stands as the second lowest since the Covid lockdowns of 2020.

Michael Kill, the head of the Night Time Industries Association (NTIA), has openly expressed that the current climate is "more concerning than anything we saw during the pandemic".

Adding to this concern is the reality that profitability has been significantly undermined by rapidly increasing labour expenses, with an overwhelming 99 per cent of enterprises acknowledging a rise in their wage bills over the previous year.

Despite many in the hospitality sector experiencing robust trade over Christmas, merely a third of businesses have reported a profit uptick during this interval.

The situation is expected to become more strenuous from April when employers will be hit with additional labour costs.

Insights from UKHospitality indicate that changes to national insurance contributions (NICs) are anticipated to inflate the cost of employing an average worker by £2,500.

Earlier in the week, it emerged that a third of UK hospitality companies might have to downsize their workforce due to increased taxation.

Alarming figures from UKHospitality suggest that one in ten may need to shutter at least one establishment, while just shy of two thirds are set to withdraw investment plans.

"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," warned the UK's three core hospitality trade associations – UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster – in a joint statement.

Recently, City broker Peel Hunt raised alarms about the future of British pub culture, stressing that structural pressures and tax increases are putting it at risk.

Hospitality was noted as the primary contributor to economic growth in November and December; however, according to Peel Hunt, tax rises announced in the October budget "halted and reversed a year-long upgrade cycle".

Both hospitality and retail sectors have been appealing to the Government for a phased introduction of changes to employer's national insurance (NICs), and earlier this year, Baroness Noakes introduced a related bill.

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Lurpak maker Arla Foods eyes cuts as it battles rising prices and 'consumer uncertainty'

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'VAT costs are killing industry' - Exeter salon boss warns chancellor ahead of Spring Statement

An Exeter hairdresser is among UK salon owners urging the chancellor to throw the sector an "economic lifeline" as a new report highlights how an unbalanced tax system is "decimating" the industry. Nathan Plumridge, owner of Darts Farm-based Energy Hair, has warned VAT costs are "killing the industry". His business, which employs 25 staff, is also about to see its wage bill rise by £50,000 following Rachel Reeves' national insurance (NI) hike for employers. "It’s not a pretty picture for the industry," he told Business Live. "It’s really alarming. When you look at the amount of salons shutting down and then reopening up as a self-employed salon. It’s having an impact on education and standards." Mr Plumridge says the main issues for salon owners are increased NI contributions and rates of pay. He says the costs will make a "massive dent" in the number of apprentices business like his can afford to take on. "Business are not going to be employing as many people because of the cost and it stifles growth. A lot of salons are still reeling from the impact of Covid and the problems are being compounded by these other financial challenges." The entrepreneur says salons are "cautious" about hiking prices, but rising costs may mean there is no option but to do it. "If nothing is announced [in the Spring Statement], it will lead to more closures within the sector. It’s a micro industry and run generally by owner operators who are on the floor… people are still feeling the impact of Covid and any additional pressure is coming out of the bottom line. So what do you do?" According to analysis commissioned by independent consultancy CBI Economics, unless changes are made within the industry there will be no new apprenticeships by 2027 and a 93% fall in employment by 2030. The British Hair Consortium, which represents 50,000 UK hairdressing professionals, is calling for Rachel Reeves to halve the VAT salons pay on labour costs to 10% to help them overcome recruitment challenges. “Our industry has been ignored for years and we’re calling on the government to correct decades of mismanagement,” said Toby Dicker, co-founder of the British Hair Consortium. “Most owners haven’t had a pay rise in many years and simply can’t consider expanding their business, let alone take on an apprentice. “A one-size-fits-all tax system doesn’t work and has created an unlevel playing field. Increasing numbers of owners are either closing their salons or changing their employment practices and are renting chairs to contractors just to survive. This report shows how cutting VAT to 10% won’t cost the Government a penny. It would save salons across the country and ensure the future of our industry which sits at the heart of the high street.”

Club L London almost triples in size as it targets international expansion

Fashion retailer Club L London is eyeing international expansion after its sales and workforce nearly tripled over two years. The Manchester-based company reported a turnover of £44.4m for the 14 months ending 31 March, 2024, according to recent filings with Companies House, as reported by City AM. This surge in revenue follows a previous year's turnover of £29.5m and £15.7m the year before that. The firm also saw its staff numbers grow from 64 to 94 in the latest financial period, up from 35 employees in January 2022. Despite the impressive sales growth, Club L London experienced a slight decline in pre-tax profits, dropping from £3.6m to £3m. The company attributed this dip to "poor consumer confidence" driven by "high and persistent inflation and a cost-of-living crisis". Nevertheless, the directors remain optimistic, expecting pre-tax profits to exceed the levels seen in January 2023 by 2025. The business anticipates further growth both domestically and internationally. The board's statement highlighted the brand's continued growth during the extended 14-month financial period, despite economic challenges: "The extended 14-month financial period... was a period of continued growth for the brand." It also acknowledged the difficult economic environment: "This is despite a backdrop of poor consumer confidence caused by high and persistent inflation and a cost-of-living crisis."

Hair salons tell Chancellor to cut VAT to save industry from 'existential crisis'

The North’s hair and beauty industry could face a long-term crisis unless the Government cuts VAT – that’s the message from the owners of salons across Merseyside. The British Hair Consortium (BHC) says the tax system is “crushing” high street salons and that the whole industry so vital to the region’s economy is facing an "existential crisis". Collinge & Co has been in Liverpool city centre for decades and every year trains dozens of apprentices who will be the future of the industry. But its boss Charlie Collinge says his company has already had to close one salon as rising costs bite – and warns that without more Government support the flow of apprentices to the industry could stop altogether. Like other high street companies, hair and beauty firms are also coping with the upcoming rise in National Insurance costs. Collinge & Co said that rise in costs was a factor in the closure of its Ormskirk salon. 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There's good progression, good career security. There's always going to be demand for hairdressing. The current hairdressers are okay. But if we don't have apprentices coming through, there's going to be a really big issue.” Charlie says he wants Chancellor Rachel Reeves to use her spring statement next month to cut VAT for hair salons. He said: “We believe we're unique. We believe we've got the highest wage bill on the high streets. For some businesses, over 60% of their turnover is going on wages. So when there is something like an NI increase, that's hitting us twice as hard as the hospitality business, it's hitting us three times as hard as a retail business. So these increases aren't equal. “ The Collinge family has worked in hairdressing since the 1940s. Peter Collinge opened his city centre salon in 1954 and became one of Britain’s most famous hairdressers. His son Andrew followed in his footsteps, becoming a regular on ITV’s This Morning alongside wife Liz. Andrew was also passionate about training in the industry – as his son Charlie, who now leads the business. As well as its flagship Castle Street salon, Collinge & Co also has a salon and training academy at Bold Street in Liverpool city centre, a salon in Heswall in Wirral, and a concession in Selfridges at the Trafford Centre. Its Ormskirk salon will close next month. Mr Collinge estimates 70% of the industry is now self-employed rather than working in or running salons. He said: “An owner of a wholesaler told me that there's no less hairdressers out there, because they know that from the amount of product they're selling to people, but they don't know where the hairdressers are operating.” And he added: “Therefore, there's less and less salons that even operate a PAYE system so that therefore are offering apprenticeships. So that's the challenge. “So let's say 70% of the industry is self-employed. 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Someone comes in, they've got someone's undivided attention for the entire time they're in. There's not many other businesses where you go in and you have that one-on-one relationship… there isn't, basically, is there?” Denise Thomas has hair salons in Litherland, Crosby and Netherton. She said: “I’ve been a hairdresser for almost 47 years and a salon owner for 25 years and one of the biggest challenges I’ve faced over the years has been VAT. “A growing number of salons now operate with chair renters who don’t have to pay VAT, which allows them to keep their prices low and creates an uneven playing field. “I also worry about the future for the next generation of stylists. Who will train them? Recently I had to make the difficult decision to let my two newest apprentices go because I simply can’t afford them. “My training provider has no salons on their books looking for apprentices this year, as chair rental salons don’t typically train apprentices. If salons like mine continue to be squeezed, they’ll become less and less viable, making it even harder for employers like me to secure a stable future.” The British Hair Consortium represents 50,000 UK hairdressing professionals. Its co-founder Toby Dicker said: “Our industry has been ignored for years and we’re calling on the Government to correct decades of mismanagement. Most owners haven’t had a pay rise in many years and simply can’t consider expanding their business, let alone take on an apprentice. “A ‘one size fits all’ tax system doesn’t work and has created an unlevel playing field. Increasing numbers of owners are either closing their salons or changing their employment practices and are renting chairs to contractors just to survive. This report shows how cutting VAT to 10% won’t cost the Government a penny. It would save salons across the country and ensure the future of our industry which sits at the heart of the high street. “Ireland has recognised this and dropped its VAT on labour intensive businesses in hairdressing and hospitality to nine percent. The change is working – new salons are popping up and paying tax while workers are also benefiting from improved employment rights.”

New Look to close all stores in Republic of Ireland in 'difficult but necessary' decision

High street fashion behemoth New Look has announced its complete withdrawal from the Republic of Ireland, putting all of its employees in the country at risk of redundancy. The retailer's Irish division, which employs approximately 347 individuals, has initiated redundancy procedures following years of sustained losses, as reported by City AM. The privately-owned firm cited an increasingly unpredictable external environment as the reason for its decision to cease trading in the Republic of Ireland, according to the BBC. "We have adapted to this evolving landscape by investing in our product proposition and digital offer. However, due to the increasingly volatile trading conditions we needed to expedite our existing plans, which included conducting a review of our operations in the Republic of Ireland," the company stated. New Look has faced a turbulent few years, with job cuts at its head office, a reduction in total store count from 800 to 400, and a shift in focus towards online shopping. Staff were informed immediately after the appointment of liquidators at the High Court and a 30-day staff consultation process has begun, reports suggest. The change will reportedly not affect its parent company in the UK, which will continue to trade both online and in-store. The retail sector has been grappling with challenges for over a decade, with the shift towards online shopping being exacerbated by the aftermath of Covid-19 and high taxation. As early as 2023, customer footfall was down by 10% compared to 2019 levels, and even lower in major cities. According to the British Retail Consortium, retail costs are expected to rise by an additional £7bn across the industry next year due to a combination of the minimum wage increase, the packaging levy and higher national insurance costs. The Centre for Retail Research (CRR) has forecasted that over 200,000 retail jobs and more than 17,000 stores are set to vanish next year. A spokesperson for New Look stated: " Over the past few years, we have had to navigate a tough external environment which has only become more unpredictable. While we have adapted to this evolving landscape by investing in our product proposition and digital offer, the increasingly volatile trading conditions have meant we need to expedite our existing plans." "Following a review of our operations in the Republic of Ireland, we concluded it was no longer viable to continue trading so had to make the difficult but necessary decision to put the business into liquidation."

Historic cider maker Thatchers posts record sales after Aldi legal battle win

Family-owned cider maker Thatchers has reported record-breaking sales, surpassing the £200m mark for the first time in its 120-year history. The Somerset-based business, established in 1904, recorded sales of £203.9m for the year ending 31 August, 2024, as reported by City AM. This is a significant increase from the previous financial year's turnover of £175.2m. Since 2018, when it posted a turnover of £99.2m, Thatchers has more than doubled its sales. Recent filings with Companies House reveal that the firm's pre-tax profit marginally increased from £15.6m to £15.8m over the year. Despite absorbing input costs and investing in new production facilities, brands, and personnel, the company's operating profit only rose by 3.4 per cent to £15.6m. The business, currently managed by the fourth generation of the Thatchers family and chaired by Martin Thatcher, continues to face rising costs. A statement approved by the board read: "The cost-of-living crisis has continued to impact consumers and an ongoing trend towards premiumisation has seen budget brands decline, while quality, trusted brands like Thatchers are growing in value and volume, with Thatchers outperforming the category every quarter." However, the company acknowledged that its success has not fully shielded it from recent economic challenges. "Like many companies, Thatchers has been affected by inflationary cost pressures such as rising raw material costs, increasing wage bills and additional taxes. "This has led to significantly reduced margins, however, mindful of the cost-of-living crisis, Thatchers has worked hard to limit the impact on customers, and where possible absorbed a significant proportion of those costs. "Additionally, the predicted increase in cider sales due with the 'summer of sort' was offset by poor weather conditions, with both on and off trade markets feeling the impact. "The cider market saw a lot of change this year, with some producers moving products into the lower ABV [alcohol by volume] tier to maximise on the change in duty, and others running aggressive promotional pricing campaigns. "Thatchers took the decision to simply remain focussed on producing great quality cider." During the year, the company grew its market share by 1.7 per cent, taking its total to 17.2 per cent. It also invested £14m in the 12 months in its cider production facilities and the completion of its automated warehouse system, up from £7m. The company has also committed to spend £24m during its current financial year on products such as a new canning line. During the year dividends of £7m were paid out, the same as in 2023 and 2022, while the average number of people employed by Thatchers increased from 253 to 261. The verdict arrives a month after the Court of Appeal ruled that Aldi had violated Thatchers' trademark with its cloudy lemon cider product. Thatchers initiated a legal dispute against the German supermarket chain in 2022, alleging that Aldi had breached its trademark by producing and selling a cloudy lemon cider similar to Thatchers' own product. Aldi's Taurus cloudy lemon cider hit the market in May 2022. Thatchers contended that Aldi's product was strikingly similar to its own lemon cider, pointing out that the colour scheme of yellows and greens and the creamy yellow backdrop could mislead consumers. However, in January 2024, High Court judge Melissa Clarke ruled in favour of Aldi, determining that it had not infringed on Thatchers' trademark. In her judgement, she observed that there was no likelihood of confusion between the brands, it bore a low degree of similarity to the trademark, and Aldi's usage did not unjustly exploit the trademark.

New Lidl supermarket to be built on edge of Somerset town

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Fashion firm Barbour launches second clothing collection with TV star Alexa Chung

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Plans to demolish entire row of shops and flats in Bristol

Plans to demolish and rebuild an entire row of shops and flats as part of a multi-million regeneration scheme are inching closer to approval. A revised set of proposals for the west side of Filwood Broadway has been submitted to council planning officers, with work potentially starting this year if approved. The scheme involves the demolition of all buildings from 4 to 16 Filwood Broadway, including shop units and flats above on the western curve, facing the play space and community centre. Behind the shops, a larger residential development is already under way on land that once housed the area's art deco 1930s cinema building. The shops will be replaced by new business units and 18 'affordable' flats, built to high-tech specifications with eco-features like solar panels and heat pumps. The plans were first submitted in November as part of the wider Filwood Broadway regeneration scheme, which received £14m from the Government's Levelling Up fund in 2023. This funding is being used for a complete refurbishment of the community centre, this residential development, and other enhancements to the area. The proposal has received only one formal objection, although the Bristol Civic Society expressed its support in principle, with a single issue concerning the internal layout of the flats. This week, the council's housing department, which is spearheading the project, submitted an entirely new set of documents detailing improvements to the area's water, sewage and drainage systems, solar panel designs, and revised plans for the building's facade, reports Bristol Live.

Wetherspoons boss warns prices 'certain to rise' following national insurance hike

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