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.