Britain’s hospitality and retail sectors are gearing up for April’s looming tax hike on employers’ National Insurance contributions (NICs) alongside a sharp rise in the minimum wage, both of which have industry leaders warning of further job losses and price increases.
Dominic Chapman, who runs The Crown Burchetts Green and Restaurant Dominic Chapman in Henley, is preparing by trimming costs and suspending investment:
“It’s about battening down the hatches. We’re being very cautious with headcount and, ultimately, it could force up prices just to keep the doors open.”
It is a common refrain across restaurants, pubs, cafés and hotels, which face what many are calling a £25bn ‘raid’ under measures set by Chancellor Rachel Reeves. Official data reveals that the number of workers employed in accommodation and food services dropped by 58,000 between January 2024 and January 2025. Retail, wholesale and car garages also shed more than 36,000 roles in the same period.
From April, employers face an increase in NICs from 13.8% to 15%, while the earnings threshold at which contributions start will be slashed from £9,100 to £5,000. Combined with a 6.7% rise in the National Living Wage, analysts at the Institute for Fiscal Studies (IFS) estimate a single full-time minimum-wage employee could cost more than £24,000 per year.
Paul Pavli, a hospitality consultant and non-executive director at Yummy Collection, says such mounting costs leave operators little choice but to hire fewer staff, while searching for top-quality recruits who can manage heavier workloads: “We’re looking at a 10% increase in labour costs per person. If you have 10 full-time staff, that mounts up significantly.”
Both hospitality and retail have already endured steep pay increases. The latest wage growth data showed a 6.6% annual rise in the sector in 2024, partly stemming from last April’s near-10% jump in the minimum wage. Such swift increases have caught the attention of the Bank of England, concerned that entrenched wage pressures might prolong inflation—potentially limiting or delaying further interest rate cuts.
Official forecasts indicate inflation could rise from 2.5% to 3.7% later this year, partly because of surging energy costs and, increasingly, price hikes as firms respond to the NICs changes.
While hospitality and retail grapple with declining headcounts, government hiring has surged. Health and social care roles have expanded by 92,000 over the past year, almost mirroring private-sector losses in retail and hospitality.
Economists note that economic inactivity—which includes the long-term sick and those not seeking work—has slightly improved. Still, business owners like Andrea Rasca, founder of the London-based food market chain Mercato Metropolitano, fear a tide of closures if the Government presses on with its NICs rise: “It feels as if they want only the biggest chains to survive. Rising taxes are setting up smaller, independent outlets to fail.”
The Bank of England’s Monetary Policy Committee is under pressure to strike a balance between countering inflation and avoiding undue harm to businesses. Economists at the EY Item Club expect the Bank to proceed cautiously when considering further rate cuts, mindful that higher taxes, wages and energy bills could create fresh inflationary risks.
Meanwhile, restaurants, pubs and shops are braced for a challenging spring, weighing whether to increase prices, cut jobs, or both. As Chapman observes, balancing the need to stay solvent against offering value and retaining staff has become a difficult juggling act—one likely to intensify once April’s tax changes arrive.
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Restaurants brace for Reeves’s £25bn tax raid as hospitality job cuts loom