Autumn Budget: Chancellor Must Curb Rising Wage Costs For Smaller Hospitality And Leisure Businesses

The Chancellor must curb rising wage costs to alleviate mounting pressure on hospitality and leisure businesses, according to accountancy firm, Menzies LLP.

The hospitality and leisure sector in the UK is continuing to see good levels of growth with the hotel industry reporting increased occupancy and increased RevPAR numbers and the restaurant industry reporting increases in dining numbers.  Despite growth in the sector, profits have been suppressed by significant increases in wage and property costs however.

Hospitality and leisure businesses have seen significant increases in wage costs in recent years and these seem set to continue with the annual increase in the National Living Wage, rising wage rates due to lack of supply and increasing auto-enrolment pension contributions. To tackle this, the Chancellor should consider softening the impact of the forthcoming increases in auto-enrolment pension contributions.

Dave Gosling, partner and a hospitality and leisure sector specialist at accountancy firm, Menzies LLP, said:

“When auto enrolment was first introduced, the minimum employer contribution was set at 1 percent.  This rises to 2 percent for contributions to be made between 6 April 2018 and 5 April 2019, and rises again to 3 percent from 6 April 2019.

“For smaller hospitality and leisure businesses, particularly those with less than about ten employees, funding these increases will be challenging. To address this, the Chancellor should consider introducing some assistance in the form of a National Insurance Contributions (NIC) rebate for smaller employers, so they don’t have to meet the full cost of the increase themselves.  This would preserve the amount going in to the pension scheme for employees but reduce the burden on their employer.”

Other ways the Chancellor could assist hospitality and leisure businesses is to avoid increasing tax rates, such as NI and VAT, which could affect consumer spending. The recent rise in interest rates is putting pressure on already-squeezed disposable incomes and this could begin to impact consumer spending.

A number of European countries, including Ireland, have used a reduced rate of VAT for hospitality and leisure businesses, to help drive tourism.  Some industry bodies have been lobbying the Government to consider this measure.