How Rachel Reeves’ disastrous budget has put the ‘final nail in the coffin’ for hair salons_Nhy
Hairdressers have warned that last year’s Budget will be the ‘final nail in the coffin’ for their industry, as higher taxes decimate jobs.
Hair salons are among those at risk after the country was hit by a ‘wave of insolvencies’, according to a report by the Confederation of British Industry (CBI).
The lobby group’s data arm, CBI Economics, said the looming rise in employer National Insurance contributions and the minimum wage could make employing staff and apprentices unaffordable for the sector.
The British Hair Consortium – which represents 50,000 hairdressers – also said salons are now sacking staff and bringing them back on a self-employed basis to avoid the tax hikes and costs associated with Labour’s reforms of workers’ rights.
Toby Dicker, co-founder of the group, said: ‘Labour’s workers’ rights Bill is effectively over as far as we’re concerned because there will be no employees left to give rights to.’
Mr Dicker says a practice known as ‘disguised employment’, involving self-employed salon teams, has already cost the Treasury £2.4 billion in lost VAT receipts since 2009.
‘The Budget is the final nail in the coffin, after several decades of being ignored as an industry,’ he added.
The report warns there will be no new apprenticeships by 2027 and a 93 per cent fall in jobs in the sector by 2030. This will take the heaviest toll on female workers, with the CBI finding that 84 per cent of those employed in the industry are women.
The British Hair Consortium – which represents 50,000 hairdressers – also said salons are now sacking staff and bringing them back on a self-employed basis to avoid Labour’s tax hikes (file photo)
Hairdressers have been hit hard by Chancellor Rachel Reeves’ raid on employers’ National Insurance contributions and inflation-busting increase of minimum wage
Salons have been hit hard by Chancellor Rachel Reeves’s £25 billion National Insurance raid. She both increased the rate paid by employers and lowered the threshold at which the levy kicks in. Firms also face an inflation-busting increase in the minimum wage.
Jo Wickenden, the director of Headmasters, which runs 56 salons in the south of England, said she was ‘really worried’ about the year ahead, calling it ‘a scary time’.
‘I had such high hopes with the new Government, and now they are potentially wrecking the industry,’ she added.
It’s not just hairdressers who are struggling, however, with new figures revealing 1,971 firms in England and Wales went bust in January – an 11 per cent increase compared with the year before – even before the tax hikes kick in.
Danni Hewson, head of financial analysis at AJ Bell, warned that the gloomy data was ‘the calm before the storm’, as the full impact of Ms Reeves’s policies will be felt when they come into force in April.
Prices are also expected to increase more rapidly, fuelling fears that Britain is facing a period of ‘stagflation’ – when the economy stagnates even as inflation pressures intensify.
In a further setback for the Chancellor, Bank of England governor Andrew Bailey yesterday said the UK was in a ‘weak growth environment’.
Giuseppe Parla, a director at accountant Menzies, said: ‘January delivered a new wave of corporate insolvencies as British business continues to be hit hard. All eyes now turn to the Treasury: will the Spring Forecast deliver further hope for growth or a return to doom and gloom for British business?’
Bank of England governor Andrew Bailey (pictured) said yesterday the UK was in a ‘weak growth environment’
Tim Cooper, president of insolvency trade body R3, said the figures suggested that ‘directors may be choosing to close down their firms’ ahead of April’s tax and wage increases.
The high street has been hit especially hard, with 58,000 fewer people employed in hospitality jobs and 36,000 fewer working in retail since January 2024.
Meanwhile, Office for National Statistics data showed there were just 819,000 job vacancies advertised in the three months to January. That was 9,000 fewer than the previous quarter, and 110,000 fewer than a year earlier.
Alex Hall-Chen, a policy adviser at the Institute of Directors, said: ‘The continued decline in job vacancies points to low business confidence in hiring new staff.’
She said Labour’s policies were ‘significantly weakening the business case for hiring’, adding: ‘Immediate action is needed to address the mounting pressures on businesses and to restore confidence in the labour market.’
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said that ‘firms will face even more difficulty in the months ahead’.
As well as fewer jobs being advertised, the average worker’s output continues to fall.
The productivity of British workers fell again at the end of last year, adding to fears the budget watchdog is over-optimistic with its forecasts.
Official figures yesterday showed output per hour worked – a critical measure of labour productivity – was down 0.8 per cent between October and December compared with the year before.
Meanwhile, Office for National Statistics data showed there were just 819,000 job vacancies advertised in the three months to January (file photo)
Productivity per worker dropped 0.1 per cent in the same period and fell 0.3 per cent from the previous quarter, according to the Office for National Statistics.
The Office for Budget Responsibility (OBR) has estimated potential productivity growth to hit 1.2 per cent by 2029.
But economist Andrew Wisehart told the Financial Times the OBR estimates were ‘starting to look insane’.
The watchdog is now working on its latest round of predictions ahead of Rachel Reeves’ Spring Statement.
