The UK’s retail and hospitality sectors are raising alarms over mounting financial pressures following the Labour government’s recent Budget.
Industry leaders and political figures warn that rising National Insurance Contributions (NICs) and other tax increases could lead to widespread closures, job losses, and reduced consumer spending.
Christine Jardine MP, the Liberal Democrat spokesperson for Scotland, has been particularly critical of the NIC hike, describing it as a “misguided” policy that threatens small businesses across Scotland.
Speaking ahead of Small Business Saturday, she highlighted polling showing that 40% of Scots expect more small business closures due to the tax rise, with 55% anticipating higher prices at local businesses. Jardine stated: “Small businesses are the engine of our economy and the backbone of our communities. We need to be doing everything we can to support them.”
The hospitality sector is expected to bear the brunt of these changes. From April 2025, employer NICs will increase from 13.8% to 15%, while the earnings threshold will drop from £9,100 to £5,000.
Combined with a reduction in business rates relief from 75% to 40% and a 15% rise in the National Living Wage, businesses face significant cost increases.
UKHospitality estimates an additional £3 billion annual tax burden for the sector. Meanwhile, Stuart Machin, CEO of Marks & Spencer, echoed concerns in The Sunday Times, warning that retailers are being “raided like a piggy bank.”
He called for a phased introduction of NIC changes and criticised policies like the Extended Producer Responsibility levy, which he said would disproportionately impact businesses without improving recycling.
Economic forecasts suggest constrained consumer spending will exacerbate these challenges. Reports indicate that 46% of consumers plan to cut back on dining out in 2025, further straining hospitality operators already grappling with inflation and labour shortages.
While the government defends its policies as necessary for stabilising public finances, industry leaders and opposition figures are urging urgent reforms.
Proposals include exempting small businesses from NIC hikes and maintaining higher levels of business rates relief to prevent closures and safeguard jobs in two critical sectors of the UK economy.
