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Largest ever increase to minimum wage takes effect

Published:  02 April, 2024

As of yesterday (1 April), employment costs have increased for hospitality businesses following a rise in the National Minimum Wage.

The new rate of £11.44 (21 and over), is the largest ever increase in the minimum wage in cash terms and the first time it has increased by more than £1.

Whilst the increases will hopefully deliver an improved standard of living for workers amid a cost-of-living crisis, the new payroll will increase the overall sector’s wage bill by £3.2bn.

As a result, UKHospitality (UKH) has warned that some businesses may not survive the increases without additional support from the government.

Kate Nicholls, chief executive of UKH, said: “Every day, hospitality is serving Britain. It’s serving the nation with good food, drink and experiences, as well as contributing £140bn in revenue, £54bn in tax receipts and providing three and a half million people with jobs.

“All of those benefits to Britain, our lives and communities are put at risk by the £3.4bn Budget hangover hitting the sector today.

 “Businesses can’t find £3.4bn easily – that’s the cost of a billion cups of coffee. The money that they want to put towards investment in growth will have to be spent keeping their doors open.

The failure to tackle costs on hospitality businesses in the Budget has meant the financial investment needed to deliver the forecasted industry growth of 6% a year is at risk. Almost two-thirds of the sector’s annual £5.4bn investment in growth could be diverted into paying the new payroll and business rates costs, according to UKH.

Nicholls added: “Our sector firmly believes in paying people a good wage that reflects their value and 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.

“Governments across Britain have levers they can pull to help businesses keep serving Britain. They can, and should, fix business rates, ease employment costs and reduce VAT. I would urge them to pull these levers quickly.”

The three quickest levers the government can pull (according to UKH):

Fix business rates – replace short-term solutions with a permanently reduced business rates multiplier for hospitality, leisure and high-street retail sectors at a rate of 30 pence in the pound.

Employment costs – support businesses to introduce the record increase in the National Living Wage by temporarily reducing the rate of employer National Insurance Contributions.

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.