The UK’s hospitality industry has been dealt a severe blow following tax increases introduced in last year’s autumn budget, with new figures showing almost 90,000 jobs have been lost in the sector over the past nine months.
According to an analysis of official employment data by UK Hospitality, more than half of all jobs lost across the economy since October have been in hospitality. The Office for National Statistics (ONS) estimates around 165,000 positions have disappeared since the budget, underscoring the disproportionate impact on pubs, bars, restaurants, hotels and leisure venues.
Economists had warned that increases to the national living wage, alongside higher employer National Insurance thresholds and levies, would weigh most heavily on businesses with large numbers of lower-paid, part-time and flexible staff. These roles are common in hospitality, and often filled by younger workers, leaving the industry exposed to structural shifts in the labour market.
The Office for Budget Responsibility had forecast that the National Insurance rise would eventually result in around 50,000 job losses. However, the Bank of England has since said the impact has already exceeded expectations, with hospitality emerging as the hardest-hit sector.
Kate Nicholls, chairwoman of UK Hospitality, described the scale of losses as “staggering” and urged the government to ease the burden by cutting VAT and reforming business rates.
“More than half of all job losses since October occurring in hospitality is further evidence that our sector has been by far the hardest hit by the government’s regressive tax increases,” Nicholls said. “The sheer scale of costs being placed upon hospitality has forced businesses to take agonisingly tough decisions to cut jobs, with part-time and flexible roles often those most at risk.”
The warning comes amid growing pressure on Chancellor Rachel Reeves from across retail and leisure. Last week, the British Retail Consortium (BRC) called for urgent reform of business rates, with its members pointing out that retailers already shoulder more than a fifth of the entire commercial property tax bill.
Helen Dickinson, chief executive of the BRC, said: “The chancellor has the opportunity at the next budget to deliver a meaningful reduction in retail, hospitality and leisure bills, while ensuring that no shop — large or small — pays more than it presently does.”
Retail bosses also cautioned that rising payroll costs are likely to filter through to consumer prices, undermining the government’s push for economic stability and growth. “For this to be possible, the conditions for stable prices, continued investment and sustainable employment must be at the heart of this year’s budget,” the group of executives said in a joint letter.
The strain is not confined to hospitality and retail. Research from the CIPD, the HR professionals’ body, found that half of employers in care and leisure reported National Insurance increases had raised their employment costs to a “large extent”.
There are tentative signs, however, that the worst may be over. The latest ONS figures show employment stabilising in the three months to June, suggesting the labour market is beginning to absorb the initial shock.
Even so, economists have warned the government not to use payroll taxes as an easy revenue lever in the run-up to the next budget. With Labour seeking new sources of income to meet spending commitments, industry leaders fear another round of hikes could further destabilise hiring.
Andrew Wishart, economist at Berenberg, said: “The government should avoid a further increase in payroll tax this autumn. If Labour really needs a big increase in tax revenue, we think it should choose a broad-based increase in income tax instead.”
For hospitality, however, the damage is already being felt in shuttered businesses, curtailed investment and tens of thousands of jobs lost. Unless the government responds, industry leaders warn the cuts may only deepen.