Beauty industry to face £400 million increase in staff costs post Budget, risking 20,000 jobs

by | Nov 27, 2024

A new report produced by Pragmatix Advisory, commissioned by the British Beauty Council, highlights the impact of proposed tax increases on the beauty industry

Key findings include: 

  • Budget measures, including the National Minimum Wage increase and changes to the National Insurance thresholds and rates, mean the beauty industry will face over £400 million (4.6 per cent) annual increase in staff costs, which is the equivalent of almost 20,000 jobs.
  • Reduction in National Insurance threshold (from £9,100 to £5,000) coupled with the increase in rates of contributions will cost the industry £260 million.
  • Hairdressing and beauty services will see the highest increase in staff costs followed by beauty retail, with costs increasing £190m and £160m respectively.

The beauty industry – including retail, hairdressing and beauty services, and wholesale manufacturing and selling of products – will see a 4.6 per cent increase in staff costs due to the introduction of fiscal measures set out in the Budget. 

Combining wage increases and alterations to NI, along with new employment measures leading to more red tape and business rates challenges, means beauty’s staff costs are set to hit £9.5 billion. 

With over 70% of businesses in the industry being SMEs (employing less than five people), the sector will face unique challenges in the wake of these measures.

The British Beauty Council says: ‘These measures show a clear failure to recognise that the vast majority of businesses in the UK are SMEs. Placing the burden on business to shoulder the majority of tax increases, particularly those with an almost 90% female workforce, is unlikely to lead to the benefits that the Treasury thinks.

‘Instead, it will most likely prevent wage increases and deter people from hiring more staff therefore stifling growth. The beauty industry already has a growing movement towards self-employment, a fundamental issue with recruitment and a marked decrease in apprenticeships of over 70% – this will only exacerbate these challenges.’

Pragmatix Advisory, founded and run by Mark Pragnell, former managing director of the CeBR, has found that the ‘hairdressing and other beauty treatment’ sector will see a £190 million per annum increase in staff costs whilst beauty and personal care retail stores will face a £160 million rise.

The Council is calling for: 

  • Tax reform including a reassessment of VAT policy, specifically focussing on the current VAT threshold cliff-edge, which deters growth of businesses particularly those with high labour costs. 
  • An evaluation of the unintended consequences such as lay-offs, employment freezes, forced self-employment, disguised employment and an increase in the underground economy.
  • A wholesale review of business rates to create a tax system that’s fit for the 21st century.

Read the full report here.

Related reads:

Trevor Sorbie MBE, renowned British hairdresser, dies aged 75

Trevor Sorbie MBE, renowned British hairdresser, dies aged 75

Creator of iconic cuts including ‘The Wedge’, hairdresser Trevor Sorbie’s influence will be felt for years to come British hairdresser Trevor Sorbie has passed away following a battle with cancer. The 75-year-old celebrity hairdresser revealed last month that he had...

Autumn Budget 2024: Chancellor Rachel Reeves delivers first budget

Autumn Budget 2024: Chancellor Rachel Reeves delivers first budget

The Chancellor of the Exchequer, Rachel Reeves, presented her Autumn Budget 2024 to Parliament on Wednesday 30 October 2024 An increase in Employment Allowance from £5,000 to £10,500 Employer National Insurance Contributions to increase to 15% with the point at which...

THE NEWS YOU NEED TO KNOW

Stay on top of what's happening across the British beauty industry with our weekly news updates, delivered straight to your inbox.

Thanks for subscribing to receive news updates from the British Beauty Council.

Pin It on Pinterest

Share this on social: