£160m rates and wage increases hit Welsh hospitality
April 1, 2024
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Significant increases to payroll costs and business rates taking effect this month jeopardise crucial investment in the hospitality sector.
The Welsh Government’s reduction of business rates relief and failure to offer any further meaningful support to businesses in its Budget, alongside a lack of action in Westminster, means that the financial investment needed to deliver growth in the industry is at risk.
Cost increases
Increases to the National Minimum Wage and National Living Wage will see the sector’s wage bill increase by £143m. As a sector reliant on its workforce, employment costs make up over half of operating costs.
Increases to businesses rates add up to a further £20m. The tax on property heavily penalises community-based businesses, like hospitality.
After a collective failure to act in Cardiff and Westminster, UKHospitality is calling on both governments to rebalance the costs that hospitality businesses pay and reduce its cost burden so they can make the investments needed to grow, create communities in which people want to live, work and invest.
Our asks
The three quickest levers government can pull:
- 1
Fix business rates
In Wales, ahead of full scale reform of the archaic and unfair business rates system, UKHospitality Cymru is asking for short-term solutions to be replaced with a permanently reduced business rates multiplier for hospitality, leisure and high-street retail sectors at a rate of 30 pence in the pound.
- 2
Employment costs
Support businesses to introduce the record increase in the National Living Wage by temporarily reducing the rate of employer National Insurance Contributions.
- 3
VAT
Reduce the rate of VAT on hospitality, leisure and tourism to 12.5%, returning to the effective policy during the pandemic and matching the average of our continental competitors.
David Chapman, Executive Director, UKHospitality Cymru
David Chapman, Executive Director of UKHospitality Cymru, said: “Hospitality is at the heart of Welsh culture and the sector serves the nation in so many ways. Our businesses provide guests from at home and abroad with fantastic experiences, but also support communities with economic growth and jobs.
“The £4 billion hospitality contributes to the Welsh economy and 180,000 people it employs in Wales directly, and indirectly through the supply chain, is all put at risk by the £160 million Budget hangover hitting the sector today.
“Businesses across the country will be scrambling to find the money to pay these higher bills and will be forced to divert cash away from investment into just keeping the doors open.
“Everyone in hospitality supports paying their staff a fair wage that reflects their importance to what we do. But we need healthy and profitable businesses to do that, supported by regulation that doesn’t penalise a community-based sector.
“The Welsh Government had a choice to support hospitality through the higher costs they’re facing today but instead they chose to slash business rates relief and raise rates with inflation.
“We now need to see action in Cardiff and Westminster to reduce the cost burden for Welsh hospitality. In the Senedd, the Government should start by reforming the broken business rates system, so it doesn’t unfairly penalise bricks and mortar businesses. In Westminster, they should ease employment costs and reduce VAT. I would urge them to take action quickly.”
