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. Meanwhile the owner of three Sefton salons says VAT is her biggest challenge and says she fears for the future of the industry.
The BHC is today issuing a report by consultancy CBI Economics saying the Government must “urgently halve the VAT salons pay on labour costs to 10%” to help salons stay competitive. It says that because hair and beauty work is labour-intensive, taxes on labour hit salons harder than other high street businesses.
More hairdressers are choosing to work on their own rather than being employed at salons – such as by renting chairs at a shared salon – to save money. But the BHC says sole traders are generally not taking on apprentices, unlike traditional salons. It says that if the trend goes on then "by 2027 there may be no new apprenticeships offered".
Charlie Collinge, managing director of Liverpool’s Collinge & Co, said last year the business had 300 applications for 64 apprenticeship places. It managed to fill 60 of those places.
This year’s apprenticeship scheme has been open for two months and has already had more than 120 applications. But so far it has only had 17 businesses express an interest in taking an apprentice.
Charlie told BusinessLive: “If you've got over 300 people applying for an apprenticeship. You should be able to fill 64 places, you really should. But I really don't think we will.
“Realistically, we could be looking at not being able to afford to run as a training provider if we can't fill or get close to filling 64 places. And then there's no apprenticeships. Then you're talking about there being no apprenticeships offered in all of Liverpool City Region.”
Charlie said the industry offered a great career and good pay – but that he was worried the pipeline of trainees could slow dramatically unless training providers like his were offered support.
He said: “We've offered amazing opportunities to people. It really does give people a good career. 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. Because that's dominant and it's cheaper, it makes it very difficult for you (as a salon owner) to then grow your business.
“I could put a job out for this salon… and we probably won't get many applications because people want to be self-employed, so it's very difficult for you to grow your business. So our succession plan is apprentices. Without apprentices, we cannot bring hairdressers into our business.”
The NI increase means Collinge & Co’s NI bill will rise 37%. But for its Ormskirk salon alone, the NI bill will rise 70% because it has several staff who work part-time and enjoy working flexible hours.
Mr Collinge said: “That NI threshold change hits that side of the business so much harder than a large business with full-time employees or people on high salaries. The hairdressing industry has always offered flexi working and it feels like we're getting hammered for it with this NI bill.”
And he added: “It's a labour intensive industry. 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.”
