Budget-related cost increases are threatening more sectors

Following the increase in employer’s costs announced by the chancellor, more sectors have expressed concern about the impact on business.

The price increases are threatening to close hairdressers and nurseries, who say they will be forced into the red and lose their profitability.

The budget increases the employer’s national insurance rate by 1.2% from 13.8% to 15 %, and lowers the salary threshold for which employers begin to pay tax from 9100 PS to 5000 PS per year.

Rachel Reeves announced also that the National Living Wage will increase by 6.7% starting April 2025.

According to a survey conducted by the British Hair Consortium, 20% of salons are considering closing within the next 12 months. The majority would consider switching to a freelance model in order to cope with cost increases.

Helen Dickinson is the chief executive officer of the industry group. She highlighted the fact that these budget increases come on top of upcoming regulatory costs as well as estimated extra costs of PS300 to PS800 millions from the Employment Rights Bill.

She said that the increase in national insurance contributions is yet another example of taxing an industry already burdened – a move which will reduce investments in shops and jobs. The UK’s biggest private employer and low-margin sector, retailers and their supply chain will be disproportionately affected by the increase in national insurance contributions.

The government’s free childcare scheme has become unprofitable, and nurseries are preparing to reduce the number of places offered.

Purnima Tauku, OBE, Chief Executive of the National Day Nurseries Association said: “It is disappointing that the chancellor, who claimed she wanted to give every child the best possible start in life, failed to announce any kind of support for early education providers and care providers.

As nurseries and other childcare providers prepare to enter the final phase of the expansion next year, their wage bills will be much higher and they’ll have to pay higher national insurance contributions. These increases must be incorporated into the childcare funding rates for next year. The government will pay for 80% childcare hours in England. Therefore, the amount they pay is crucial to the sustainability of this sector.

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