Scotland’s hospitality sector issues warning over Labour Budget

The Scottish Hospitality Group (SHG), which represents the largest group of independent, family-owned hospitality businesses in the country, said the UK Budget announced on Wednesday has “dealt a body blow to businesses across the country”.

In the UK Budget announcement Chancellor Rachel Reeves revealed that the National Insurance contributions for employers will rise by 1.2%.

The threshold at which employers start paying the tax on each employee’s salary will be reduced from £9100 to £5000, which the group said will see most of its members paying an additional £160,000 a year – before the 6.7% and 16% increase in the National Minimum Wage is included.

READ MORE: Budget means ‘additional £3.4 billion for Scottish Government’, Chancellor says

It said businesses with more than 700 employees will have an additional £3m of costs added when the National Living Wage increase is factored in with the change to National Insurance.

Stephen Montgomery (below), a spokesperson for the SHG, said the sector will be “stifled” and that the Budget announcement goes against the growth and investment which was “promised”.

“SHG cannot see how this budget addresses the Government’s ambitions of a ‘dynamic, modern and growing economy‘,” he said.

“The effect on hospitality, a key sector to growing the economy, will be to stifle growth and investment, the very opposite of what has been promised,” he said.

“With £3.4bn in additional Barnett consequentials, the Scottish Government now has the funds available to make good on its commitment to support the hospitality sector and deliver an immediate reduction of the business rates poundage to 35p in the coming Holyrood Budget.

“This is particularly the case given the Chancellor of the Exchequer has extended business rates relief for the hospitality sector in England and has also indicated the UK Government will reform the entire business rates system from 2026.

“Reducing the business rates poundage to 35p in the Holyrood budget would help the hospitality sector to boost economic growth, create jobs and support Scotland’s communities and high streets, while also ending the inherent unfairness that sees hospitality businesses taxed at a higher rate than retail businesses.”

The Scottish Licensed Trade Association (SLTA) echoed SHG concerns that the hospitality sector will take a significant hit due to the increase in employer National Insurance contributions and the cut to the threshold.  

A spokesperson for SLTA said: “These will be yet another fiscal burden for all businesses and will restrict investment, restrict growth and increase the risk of job losses. As a staff-intensive sector, many in the licensed hospitality industry will now be questioning whether or not they can even maintain their current staffing levels. 

“With many pubs and bars teetering on the precipice of closure, recent figures suggest that 20% of UK pubs and bars are technically insolvent, the Chancellor’s ‘short-term pain-long-term gain’ Budget is cold comfort to many businesses who will not be here to see the gain, whatever or whenever that might be.”