Hospitality Sector Confidence Plunges as Tax Storm Looms

The confidence of businesses in the hospitality sector has plunged to its lowest point in two years as concerns mount over significant cost increases scheduled for April.

The industry is bracing for substantial financial impacts from imminent tax hikes, mainly changes to employer National Insurance Contributions (NICs). From April, these cost increases will bring approximately one-fifth of the hospitality workforce—around 20%—into the tax threshold for the first time, substantially escalating expenses for employers across the sector.

This development follows widespread cross-party criticism directed at the government during the second reading of the NIC Bill in December 2024. Politicians warned that the planned increase, due to take effect in 2025, could have "catastrophic" consequences for hospitality, potentially destabilising one of the UK's vital economic sectors.

Industry experts, including UKHospitality, have urged immediate action from the government. Kate Nicholls, chief executive of UKHospitality, called for an urgent delay in reducing the employer NIC threshold during the upcoming Spring Forecast, scheduled later this month. Nicholls emphasised that the sector faces severe repercussions if these tax increases are not reconsidered.

"These tax increases may well deliver sizeable receipts for the Treasury, but will hit the economy, jobs, communities and, ultimately, the government's revenue streams," Nicholls stated. She warned further that businesses would have no choice but to "cut jobs, freeze recruitment, cancel planned investment, reduce trading hours, and in the worst cases, shut their doors permanently."

Adding urgency to the matter, UKHospitality has requested the government to provide substantial relief through business rate reform, offering the maximum possible discounts to ease the financial burden on hospitality operators.

With the Spring Forecast approaching later this month, the hospitality sector anxiously awaits the government's decision. Kate Nicholls has urged swift and decisive action, suggesting that delaying the threshold change for employer NICs would alleviate much of the immediate financial strain and enable the industry to maintain its trajectory towards recovery and growth.