Two in five hair salons at risk of closure after budget tax rise

Two in five hair salons are at risk of closure over the “devastating” increased cost of employment set out in last month’s budget, industry leaders have warned.
Carla Whelan, chief executive of the Regis and Supercuts group of salons, said the increase in employer national insurance contributions “will see salons which have been around for many years close” as the £25 billion tax rise undermined profitability.
“This creates an impossible profit and loss for individual hair salons where labour is circa 50 per cent of the cost,” said Whelan, whose group is the largest “owned”, or non-franchise salon group, in the UK.
The chancellor’s decision to increase employer national insurance contributions by 1.2 percentage points to 15 per cent from April, and reduce the level at which employers start paying the tax on salaries from £9,100 per year to £5,000, has prompted alarm in various industries.
A survey carried out by the British Hair Consortium, an industry group, found that two in five respondents to the survey said they were considering closing their businesses in the next 12 months.
It also suggested the majority of salon employers would consider switching to a self-employed model in order to deal with the increase because they “feel forced to do so in order to survive” — even where the move may not be lawful.
Toby Dicker, the owner of five salons with 65 employed staff, said the changes in the budget would cost his business £122,000 in additional costs.
Dicker, the founder of the Salon Employers Association, said “disguised employment”, where businesses use self-employment to avoid their obligations, was already “rife” in the industry and the budget would only exacerbate the situation.
Andrew Collinge, chairman of Collinge & Co, a fourth-generation family hairdressing business with five salons and a training college, has written to Jonathan Reynolds, the business secretary, to warn of the “devastating” impact of the budget.
Collinge, also known for his appearances on ITV’s This Morning, wrote: “Our company will not be alone in having to make upsetting and difficult decisions. We believe in contributing through paying taxes, but this budget appears to unfairly target employment.”
Britain’s biggest companies, including Sainsbury’s, BT and Serco, have warned that they may bump up prices to offset the higher tax bill caused by the measures outlined in the budget, which also included a 6.7 per cent rise in the minimum wage. Tesco, Britain’s largest supermarket, faces a £1 billion increase in its national insurance bill across this parliament, according to research by Morgan Stanley.
The Night Time Industries Association said that four in ten late-night venues are facing closure while UK Hospitality, an industry group, warned over the weekend that budget policies, including the national insurance rise, would “cause small business closures, job losses and cancelled investment”.
Research by Shore Capital found that among listed companies, hospitality stocks have performed worst in terms of their market value since the budget. In some cases “negative share price reaction goes well beyond the announced expected increases in employment costs”.
Its research predicted that a “combination of underlying momentum, pricing and cost initiatives” could mitigate the impact on market value from the moves.
Care home bosses also warned that the move could put some homes at risk of closure and reduce capacity in the industry, just as demand for social care was growing.
Elsewhere, Forterra, a manufacturer of building products, warned on Monday that the national insurance increases would contribute to higher prices for customers.
Company insolvencies in the UK have risen sharply after the government reduced tax breaks and increased levies for owners. At least 1,022 companies filed to shut down in the week ending November 8, a rise of 64 per cent from a year earlier, according to an analysis by Bloomberg.