(Bloomberg) -- The UK’s hospitality sector said a planned tax hike would force businesses to “drastically cut jobs” and put some at risk of closing down, the latest in a string of warnings against Chancellor Rachel Reeves’ budget plans.
Over 200 hospitality bosses including Whitbread Plc Chief Executive Dominic Paul and Fuller, Smith & Turner Plc boss Simon Emeny signed a letter from trade body UKHospitality, outlining how the changes to national insurance contributions would impact the industry. The moves, along with changes to the national minimum wage, could cost hospitality £3.4 billion ($4.4 billion) a year “at a conservative estimate,” according to the letter.
Reeves’ maiden budget last month outlined more than £40 billion of tax increases, as well as higher borrowing aimed at driving future economic growth through capital investment. Among other measures, the rate of employers’ national insurance contributions — a form of payroll tax — will climb by 1.2 percentage points to 15%, while the wage threshold at which employers will begin paying contributions will fall from £9,100 to £5,000.
“There is no capacity to pass the costs onto customers,” UKHospitality CEO Kate Nicholls wrote in the letter. This will force businesses to reconsider investment and “drastically cut jobs,” she added.
The budget measures prompted retailers including J Sainsbury Plc and Marks & Spencer Group Plc to warn last week of higher costs. Tesco Plc, Britain’s largest private sector employer, will see its national insurance bill rise by £1 billion this parliament, the Sunday Times also reported.
The letter proposed the creation of a new national insurance contribution band with a lower rate of 5% for those earning between £5,000 and £9,100; or of an exemption for those working less than 20 hours a week.
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