Tax rises threaten to turn high streets into ‘ghost towns’ as businesses grapple with higher costs
Daily Telegraph 11 November 2024
Rachel Reeves’s tax raid risks turning high streets into “ghost towns” for much of the week, as pubs, restaurants and shops prepare to shut earlier and open on fewer days.
Retail and hospitality chiefs said they were actively looking at reducing opening hours in response to Ms Reeves’s decision to raise employers’ National Insurance contributions.
It raises fears that the Budget will worsen problems for Britain’s high streets and leave town centres largely shuttered outside the busiest shopping days of the week.
Luke Johnson, the chairman of bakery chain Gail’s, said Ms Reeves’s decision to raise the cost of doing business “only adds to the decline of town and city centres”.
The Night Time Industries Association (NTIA), which represents bars and clubs, warned that four in 10 of its members were at risk of closing down within six months.
Michael Kill, the industry group’s chief executive, said: “The autumn Budget has effectively signed a death sentence for many night-time economy businesses across the UK. This sector is being pushed to the brink.”
Andrew Goodacre, chief executive of the British Independent Retailers Association, which collectively represents 8,500 shops across the country, said: “Our members have already told us they will be forced to reduce staff hours, reduce the number of employees and reduce the trading hours.
“In short, the Budget has made the revitalisation of high streets, a key mission for this government, very much harder.”
Labour promised to “breathe life” back into the high street in its manifesto, suggesting it would shake up the property tax system to help support small retailers.
However, Andrew Griffith, the shadow business secretary, said: “Having spent the summer trash-talking down consumer confidence, Labour’s tax rise Budget means the only way hospitality businesses can balance their books is with fewer hours, fewer staff or both.
“That’s going to leave our high streets like ghost towns many nights of the week. It’s only been a few months yet under Labour the lights are literally going out.”
The Chancellor last month announced an increase in the rate of National Insurance contributions paid by employers, from 13.8pc to 15pc, and also lowered the threshold at which companies become liable to pay the tax.
Ms Reeves separately increased the national minimum wage from £11.44 to £12.21 an hour. All changes are due to come into force next April.
Hospitality and retail chiefs have argued that the changes disproportionately affect their businesses, which employ large numbers of people on low wages. Bosses argue that these roles are often many people’s first jobs and offer valuable experience in work.
Both retail and hospitality companies also rely on an army of part-time workers. The lowering of the National Insurance threshold means many part-time workers will now trigger a tax bill for employers for the first time.
UKHospitality, which represents pubs, restaurants and bars, has warned that the sector is facing £3.4bn in additional employment costs as a result of the Chancellor’s policies. Industry leaders warned in a letter sent to Ms Reeves over the weekend that many companies were being forced to slash investment plans and consider price rises, job cuts or closures.
For businesses that remain open, many are looking at reducing their hours by either opening for a shorter period of time during the day or staying shut for more days of the week.
Kate Nicholls, the chief executive of UKHospitality, said the Budget was “causing venues to consider cutting their opening hours, or even close on more days, to manage rising staffing costs.”
Alan Morgan, the chief executive of one of Britain’s largest restaurant groups, Big Table Group, said he was looking at cutting back opening hours.
Mr Morgan told The Telegraph: “Nothing is out of scope at the moment as the damage caused by the National Insurance changes will be substantial.”
He said options being considered included reduced opening hours and cutting staff numbers, as well as price increases. Big Table Group owns chains Bella Italia, Cafe Rouge, and Las Iguanas among others, and has more than 220 restaurants across the UK.
The British Institute of Innkeeping, which represents the pub sector, said more than 40pc of its members were planning to reduce their trading hours in response to the Budget. Three-quarters plan to cut staff hours, meaning fewer people would be working at any given time.
Ms Nicholls warned that the Budget “jeopardises full-time, full-service high streets and investment in them”.
Clive Black, an analyst at Shore Capital, said the extra costs would “undoubtedly be a blow to high streets and shopping centres”.
He added: “Quite a few shops close Monday already. I would not be surprised to see owners also looking at other demonstrably quiet times too, say Tuesday.”
Billions of pounds have been wiped off the value of the shares of high street employers since the Budget amid concerns over the looming cost increases. The retail and hospitality sectors are the first and third-biggest employers in the UK.
The NTIA said “relentless cost increases” meant 40pc of businesses in the night-time economy faced closure within the next six months without urgent support. The group represents bars, pubs and clubs with late opening hours.
Its members are in “severe jeopardy” following the Budget, NTIA warned.
Mr Kill, the group’s chief, said: “The Government’s ‘pro-growth’ claims ring hollow in the face of policies that are, in reality, crippling the very industries that drive economic vitality, social cohesion and cultural richness.”
Three-quarters of late-night venues expect their operating bills to rise by more than £30,000 this year, with tax playing a hard part in the jump.
The Chancellor has defended her decision to increase taxes on businesses by insisting that “difficult decisions” must be taken to fix public finances.
A Treasury spokesman said. “With our public services crumbling and an inherited £22bn fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive.
“More than half of employers will either see a cut or no change in their National Insurance bills, and to support the hospitality industry we’re permanently cutting business rates for every shop on the high street from 2026 alongside a 40pc relief on business rates bills next year for thousands of premises.
“This Government is committed to delivering economic growth by boosting investment and rebuilding Britain.”
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