Dramatic wage inflation heightens post-Budget blues

By James Lawrence

Published: 13 November, 2024

New data published by the Office for National Statistics (ONS) has revealed that average weekly earnings in the food and accommodation sector continue to spiral, exacerbating the financial woes of hospitality businesses nationwide.

According to ONS labour market statistics, average weekly earnings in the food and accommodation sector have risen 12% to £581.64 in Q3 2024, from £518.01 in Q2 2024 – the highest quarter on record.

Meanwhile, employment in leisure and hospitality sectors increased by 0.22%, which was the first year-on-year uplift since Q3 2023.

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However, vacancies in the sector continued a downward trend at 94,000 in the three months to October 2024, from 98,000 in July 2024.

As reported in Harpers, a perfect storm of changing business rates – the current 75% relief will drop to 40% for the financial year 2025/26 – National Living Wage rises and a planned increase to employer NI is likely to have a corrosive impact on the hospitality industry, reducing profitability and investment.

Described as a “tsunami of employment costs” by UKHospitality chief Kate Nicholls, Rachel Reeves' inaugural budget has been greeted with widespread consternation from the trade.

According to the tax and consulting firm RSM UK: “Another sharp jump in wages highlights acute staffing challenges and pronounced pressure on wage inflation, and in turn margins.”

Saxon Moseley, head of leisure and hospitality at RSM UK, commented: “With vacancies continuing a downward trajectory and employment slightly up for the first time since Q3 last year, operators look to have re-evaluated operations ahead of the national minimum wage increase in April 2024 to mitigate the impact on costs.

“However, if staffing efficiencies have already been made, businesses will find it more difficult to protect margins, and ultimately the viability of roles and the business, when faced with the additional tax headwinds post-Budget. When you consider the cost of employing a full-time employee could increase by up to £2,500 with the proposed NIC changes, National Minimum Wage increases and the extra compliance burden, the industry is bracing for impact and many businesses could be facing a financial cliff edge.”

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