(Bloomberg) -- Britain’s pubs and restaurants have complained of rising taxes and wage costs, despite the Labour government trying to win favor by reducing the price of beer.
Chancellor of the Exchequer Rachel Reeves announced a 1.7% cut in duty on draft alcoholic drinks in Wednesday’s budget, the equivalent of 1 pence off the cost of a pint. However, Greene King CEO Nick Mackenzie said the measure was “a drop in the ocean” compared with tax hikes imposed on businesses.
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Reeves lifted employers’ national insurance contributions, a major payroll tax, by 1.2 percentage points to 15% from next April, and lowered the threshold so that businesses start to pay the tax when a worker earns £5,000 ($6,500).
“The headline will be a drop in beer duty, but the drop in the threshold for employers’ national insurance is penal,” said Phil Urban, chief executive officer of Mitchells & Butlers Plc. He said industries with a high proportion of part-time workers “are getting clobbered.”
Shares in M&B and other pub groups rose after the chancellor revealed the cut to draft duty. JD Wetherspoon Plc increased as much as 4.4%, while Marston’s Plc was up more than 7%. Labour’s tax rises had been widely expected before the speech.
Reeves also announced a reduction in the relief that retailers and hospitality businesses receive on business rates — a property tax — and confirmed a 6.7% increase in the minimum wage.
‘Big Dampener’
“The tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it,” said Kate Nicholls, the chief executive officer of trade body UKHospitality. “Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.”
UKHospitality said Reeves’ budget would increase the annual tax bill for businesses in the sector to £3 billion, while the British Beer and Pub Association said its industry would face an extra £500 million in costs.
“It is hard to see how this budget will unlock growth and the critical investment needed to deliver it,” said Emma McClarkin, head of the BBPA.
Karan Bilimoria, founder of Cobra beer and a member of the House of Lords, told Times Radio the hike was a “huge, huge burden” and would be a “big dampener on the ability of businesses to grow.”
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