Hospitality Sector Bears Brunt of Job Losses as Wage Costs Bite

Britain’s hospitality industry continues to shoulder the heaviest burden of the UK’s weakening employment market, with new government statistics revealing the sector is experiencing the steepest decline in payrolled positions across the economy.

Latest figures from the Office for National Statistics show hospitality businesses are cutting jobs at an accelerated pace, with the sector accounting for the majority of employment reductions alongside retail since last October.

The data suggests operators are still grappling with the financial impact of April’s dual hit from increased employer National Insurance contributions and minimum wage rises.

Across the broader economy, average earnings growth has decelerated to 4.6% from 5% in the previous quarter, though pay excluding bonuses maintained its 5% growth rate during the three months to June. This moderation comes as employers across multiple sectors, particularly in hospitality, have reduced their workforce numbers for ten of the past twelve months.

The employment landscape has shifted significantly for hospitality operators, who now face a more challenging recruitment environment. Job vacancies have been on a downward trajectory since early 2022, falling to 718,000 in June – a quarterly decrease of 44,000 positions.

Speaking about the data, ONS director of economic statistics Liz McKeown noted that hospitality businesses are among those providing fewer job opportunities, contributing to the overall decline in available positions. The sector’s struggles reflect the ongoing adjustment to increased operational costs, with many operators still absorbing the financial shock from regulatory changes implemented earlier this year.

The combination of higher wage floors and increased employer contributions has created a perfect storm for labour-intensive hospitality businesses, many of which operate on traditionally tight margins. Industry observers suggest many establishments are opting not to replace departing staff or are postponing new recruitment drives while they adapt to the changed cost structure.

The hospitality sector’s employment challenges mirror wider economic headwinds, with unemployment holding steady at 4.7% in June. This represents an increase from 4.2% twelve months ago and 3.9% before the pandemic, indicating a gradual cooling of the jobs market.

However, ONS officials continue to urge caution when interpreting monthly unemployment figures due to ongoing data collection challenges, including reduced survey response rates from the public.

Kate Nicholls, Chair of UKHospitality, said:
“Today’s employment figures show that hospitality and retail – the sectors most heavily impacted by changes to employer National Insurance Contributions (NICs) – continue to bear the brunt of job losses.”

“The biggest fall in employment is among younger workers, those seeking their first roles, in entry level jobs or holiday jobs. A group that is now losing out on opportunities to gain vital experience and essential skills.”

“The hospitality sector is a key provider of these valuable roles yet, since the announcement of the changes to employer NICs – which are set to cost the sector £3.4bn per year – 84,000 jobs have been lost in the sector”

“Hospitality businesses are being taxed out by rising costs and policy decisions that make it harder for businesses to hire and invest. If the Government is serious about supporting growth and tackling youth unemployment, it must urgently rethink the pressure it’s placing on hospitality businesses.”