We’ll have to boost pub costs after the Budget: Bosses warn punters can be hit within the pocket to cowl tens of millions extra in prices after chancellor’s £40billion tax raid – as companies warn of risk to jobs and wages

An executive at one of the UK’s biggest pub groups has claimed they will have to raise their prices after Labour’s record budget upped their costs by £1.7million and made their business a ‘loss making enterprise’ overnight. 

Yesterday, Chancellor Rachel Reeves announced a slew of new fiscal policies which businesses say they will have to shoulder the burden of and warned the scale of the tax rises would hit growth and jobs.

In the most Left-wing Budget for decades, Labour pushed taxes to their highest level in history and relaxed government borrowing rules to finance a massive spending spree. 

Included in the raft of new proposals was a 6.7 per cent rise in the minimum wage and a rise in employers National Insurance (NIC) contribution, something which the hospitality industry has decried. 

Businesses reacted with fury to Reeves’ £25billion tax raid yesterday amid fears it will cost jobs, lower salaries and push prices up for customers.

Ms Reeves, the first woman in history to deliver a Budget, said the ‘once in a parliament’ event was needed to fix the damage done to public finances by the last government, repair public services such as the NHS and lay the foundations for future growth. 

But Louise Maclean of Signature group pubs said that the budget has pushed her company and many others into the red, which will affect the consumer.

=’Why is it always us? We all knew that employer NI was going up and that the national minimum wage was going to increase but the drop in the threshold was a bit of a kicker we didn’t see coming,’ she told BBC Radio 4’s Today program.

The total impact for our business is a £1.7million increase in staff costs and we don’t make that in profit. 

‘Yesterday’s budget made us a loss-making enterprise, so we are going to have to make some changes in April to tip us back into profit. We don’t want to let people go or close revenues. 

‘We will have to pass it on to the consumer which we don’t want to do. This will mean increased prices in every venue across the country from April 1. 

‘When our costs go up so significantly, we will have to pass that on to the consumer and how much more can the consumer take.’ 

The Chancellor hiked employer national insurance contributions by 1.2pc to 15pc from April next year.

And she slashed the earnings threshold – the amount workers must earn before employers pay national insurance – from £9,100 to £5,000.

NICs will not be increased for employees after Ms Reeves vowed not to target ‘working people’ and instead hit firms in order to raise revenues.

The Chancellor acknowledged that hitting firms with higher taxes was ‘a difficult choice’, but businesses said it would ‘batter’ firms.

But, in a furious backlash at the move, senior industry figures said it would bring growth to a ‘grinding halt’, force companies to cut salaries, reduce hiring and hike prices to cope with the additional cost of employment.

Employers are also facing increased costs from April next year after Ms Reeves announced inflation-busting increases to both the National Living Wage and National Minimum Wage.

The £25billion raid on employers’ NICs came as part of a wider £40billion ‘tax bomb’ unveiled by the Chancellor in her first Budget.

The Office for Budget Responsibility (OBR) said it expects that businesses will ‘pass on most but not all of their higher tax costs to employees’.

It estimated that 60pc of the tax would be shouldered by workers and consumers through lower wages and higher prices in the first year the policy is introduced.

The remaining 40pc will be absorbed by businesses through lower post-tax profits.

But from 2026/27 onwards, it predicted that 76pc of the cost will be passed on through lower wages, with 24pc paid for through company profits.

That counters Labour’s manifesto commitment to shield ‘working people’ from the impact of tax increases.

Becky Lumsden, 49, described the budget as an ‘extinction-level event’ for her business as it imposed a £300,000 increase in staffing costs on her 23 beauty salons. 

The mother-of-two from Edinburgh, who employs around 200 people at Pure Spa, which she started in 2002, says she cannot afford this as it stands.

Reacting to the Budget, she said: ‘It’s a complete disaster for our business. It’s going to cost our business about £300,000 to implement changes that the Chancellor announced in her Budget.

‘She talked about invest, invest, invest, but I don’t know how you can invest when you are faced with a cost of £300,000 overnight to try and find.’

She added: ‘It’s an absolute disaster, our industry is being decimated by every policy they seem to come up with.

‘We’re limited in what we can do when it comes to passing on any tax increase. Almost half of our revenue goes to the government, it’s astronomical.

‘I feel like going to the government and saying ‘here’s my company run it for me’. It’s very disheartening.

‘We work the hardest in our business and we’re the lowest paid people on our payroll but we’re not classed as workers, apparently.’

Mrs Lumsden says around 60 per cent of her costs are staff so a rise in the National Insurance rate for employers is ‘disastrous’.

‘This is a tax on jobs and it is the worst thing we ever expected them to come up with,’ she said.

‘I don’t feel like they’re fairly sharing the burden. I think it’s disproportionate, the burden will be felt hardest on small and medium businesses.’

She added that she will have to look at ways to operate with less staff and will have less funds to invest in her businesses which will make it more vulnerable.

While Lawrence Barton, who owns three bars in the centre of Birmingham, labelled it a ‘dark day’ for the hospitality industry that will spell the end of many businesses.

The 50-year-old says the rise in employers’ national insurance contribution and minimum wage plus the cut in business rates relief will add £150,000 to his costs.

He is an additional rate taxpayer, earning more than £125,000 a year, and insists this has been the ‘toughest’ year in business since he began almost three decades ago.

‘It’s becoming depressing really,’ he said. ‘I am watching local, regional and national businesses fail on a scale I have never seen. People are feeling quite desperate.’

Mr Barton, who owns The Village Inn, The Loft and The Nightingale in Birmingham, employs around 100 people and the rise staff costs come at a time when they were already trading at a loss.

‘It is going to make life worse as it is. There will be business closures. what we need is relief,’ he added.

‘This type of extra cost will have a detrimental impact on many businesses. It is not a smart strategy to fix something which will lead to more funding holes.

‘By penalising businesses you are suffocating the very businesses which would be far more beneficial in the medium term.’

Sean Finnegan, 49, says the rise in employers’ National Insurance Contributions will cost his business an extra £1,500 a month.

He employs 10 people at the Fold Bistro in Stockport, Greater Manchester, and won’t be able to invest in the restaurant or recruit for more roles following the tax hike.

‘It’s a substantial monthly increase,’ he said. ‘It’s going to affect the sector overall as costs continue to spiral.

‘The sins of a few are being paid by the blood sweat and tears of the many.

‘It just shows the nature of the government here and they just won’t stand up to the real issues and expect the private sector to bear the biggest brunt.’

The fine-dining restaurant opened in January 2023 and executive chef Ryan Stafford appeared on the final of the BBC’s Great British Menu last year.

Mr Finnegan believes the government is unfairly punishing small businesses.

‘For them to have minimum wage go up over the cost of inflation in back to back financial years, it is basically asking small businesses to pay the cost of government ineptitude,’ he said.

‘It shows a total fear of big business and being unable to stand up to them.’

He added: ‘The UK food scene has taken centre stage over the last 10 years and that work is going to be undone by a succession of ill-advised policies and they’re not listening to the hospitality sector.’

Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said: ‘The true test of today’s Budget will be whether small businesses can grow and end the economic stagnation the UK has been stuck in.

‘Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance on top of the large costs from the Government’s employment law plans.

‘We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices.’

Rain Newton-Smith, chief executive of the Confederation of British Industry, said Ms Reeves had unveiled a ‘tough Budget for business’.

‘The hike in NICs alongside other increases to the employer cost base will increase the burden on business and hit the ability to invest and ultimately make it more expensive to hire people or give pay rises,’ she added.

Kate Nicholls, chief executive of UK Hospitality, warned of a ‘painful’ time for hospitality businesses next year due to an increased annual tax bill of £3billion for the sector.

‘This Budget is the latest blow for hospitality businesses,’ she said. ‘Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.

‘In the short-term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it.

‘Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.’

Shevaun Haviland, director general of the British Chamber of Commerce, said: ‘While some protection for smaller firms is welcome, the increase in employer NICs will place a further cost burden on business.

‘This, coupled with a 6.7 per cent increase in the National Living Wage, means many firms will find it more challenging to invest and recruit in the short-term.’

Pimlico Plumber founder Charlie Mullins said: ‘Labour lied their way into power and today the fraud was laid bare.

‘They said there would be no major tax surprises. People aren’t stupid. If you batter employers for £25bn, that will hit company’s costs and impact workers and the economy.’

Paul Johnson, the director of the Institute for Fiscal Studies think tank, said ‘working people’ would largely pay for the higher taxes.

‘The employer NICs rise will further increase the incentive for employers to switch to contracting with the self-employed,’ he added.

Lee Biggins, chief executive of jobs site CV-Library, said: ‘We’ve heard from our customers – some of the UK’s biggest recruiters – that the increase in employer National Insurance contributions announced in today’s budget is likely to result in a decrease in hiring.

‘Employers will need to shoulder the cost and there is a very real worry that it will ultimately hit workers through lower wage growth or less hiring.’

Simon Delaney, who has owned The Firbank Pub and Kitchen, in Wythenshawe, Manchester, for 30 years, said the rise in employers’ NICs and minimum wage hike will cost his business an extra £2,000 a month.

The 59-year-old told MailOnline: ‘It’s definitely not a Budget for pubs or small businesses like mine.

‘The National Living Wage going up, I’m not sure where that money is going to come from.

‘Employer national insurance coming up, again where does that money come from? We are already struggling to break even.’

Alisa Zotimova, 44, revealed she had to shelve plans to grow her business, which involved hiring new staff members, because of the increase in employers’ NICs.

The mother-of-two, who started AZ Real Estate in Marylebone 12 years ago, said the rise in costs is ‘frustrating’ and described it as a ‘tumultuous’ time for business.

‘Increased National Insurance payments for my business is not going to break the bank but it means there is less money to go around,’ she told MailOnline.

‘If it increases with pension contributions then I won’t be able to top up what is more than necessary as an employer.

‘I was planning to grow the business and up the revenue by hiring more people but I don’t think I can do this anymore.’

Karan Bilimoria, crossbench peer and founder of Cobra Beer, branded the NI hike a ‘big dampener on the ability of businesses to grow’, telling Times Radio it is a ‘huge burden on business’.

John O’Connell, chief executive of the TaxPayers’ Alliance, said: ‘This astonishing hike in national insurance contributions for employers will decimate businesses up and down the country.’

CBI chief executive Rain Newton-Smith said: ‘The hike in National Insurance Contributions alongside other increases to the employer cost base will increase the burden on business and hit the ability to invest and ultimately make it more expensive to hire people or give pay rises’.

AJ Bell’s Laura Suter said: ‘It’s a Budget to batter business’. ‘It will inevitably hit the British public in their pockets as companies pass on those costs.

‘Whether that’s lower pay rises for staff, cuts to future hiring or businesses passing on cost increases to customers.’ 

  In the first Labour Budget for 14 years, Ms Reeves:

• Launched a £25 billion raid on employers’ National Insurance, breaking a manifesto pledge not to raise a levy she previously called a ‘jobs tax’;

• Announced an immediate £25 billion cash injection for the NHS, despite previously warning it needed to reform first;

• Increased government borrowing by £32 billion a year after rewriting the fiscal rules;

• Hiked inheritance tax by £2 billion, in a move that will hit those looking to pass on their pensions;

• Hit savers and investors with an extra £2.5 billion in capital gains tax;

• Unveiled a 6.7 per cent rise in the minimum wage and pledged to end lower rates for the under-21s;

• Enraged farmers by restricting an inheritance tax loophole that allows them to pass on the family farm;

• Pressed ahead with a ‘class war’ VAT raid on private schools, which economists say will push 35,000 children into the state sector;

• Slapped an extra 2 per cent stamp duty on second homes and signalled the end of a temporary stamp duty discount introduced by the Tories;

• Spared drivers a 7p rise in fuel duty by announcing a one-year freeze at a cost of £3 billion;

• Backed away from plans to extend the six-year freeze in tax thresholds for another year;

• Set aside £11.8 billion to compensate victims of the infected blood scandal, with a further £1.8 billion for those hit by the Post Office scandal.

In her speech, Reeves has vowed to take a ‘penny off the pint in the pub’ as she slashed draught duty by 1.7 per cent. 

She said that she would cut duty on draft booze in pubs in a bid to drive down costs for some punters, with a penny reduction for pubgoers getting draught beer and lager at their locals.

‘Nearly two-thirds of alcoholic drinks sold in pubs are served on draught,’ Ms Reeves told MPs. ‘So today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7 per cent, which means a penny off a pint in the pub.’

Are YOU a landlord or brewer? Tell us how the Budget has hit by emailing john.james@mailonline.co.uk 

This means that all other tipples such as wine, whisky and gin, will increase as producers attempt to offset the hike – with furious industry chiefs accusing Labour of rowing back on their election pledges over the decision.

 The Chancellor’s move to raise alcohol duty by RPI has been branded ‘a real kick in the teeth’ by the wine and spirit sector, following punishing duty increases last year which saw booze hit with the largest tax rise in almost 50 years. 

Business boss Nuno Teles, managing director of Diageo, said: ‘The Government has broken its promise and slammed even more duty on spirits. This betrayal will leave a bitter taste for drinkers and pubs, while jeopardising jobs.’

The Wine and Spirit Trade Association (WSTA) and its members have long argued that raising taxes is counterproductive and doesn’t guarantee revenue increases 

The group warned that hiking duty could stunt business growth, raise prices for cash-strapped Brits and, crucially, not help the Treasury claw back much-needed funds to plug the black hole in the public finances. 

Miles Beale, the association’s chief executive, said: ‘We simply cannot understand why Government has said they are trying to protect income and in the next breath raising alcohol duty in a move that is totally counterproductive. 

‘Recent history has shown us that duty increases lead to price rises for consumers, a dip in sales and, as a result, fewer receipts for the Treasury. The near £500 million loss in alcohol duty receipts, in the last six months, couldn’t make that clearer.

‘We are bitterly disappointed that Labour, despite their manifesto pledge to prioritise growth, has chosen not to listen to business – especially SMEs, which will be hit hardest of all. Instead of reversing the last Government’s damaging plans to bring in unnecessary, complex and costly changes to the way wine is taxed, Labour wants to plough ahead.’

Steve Finlan, Wine Society chief executive, added:  ‘The assault on the wine industry continues. While we hear promises of growth and support for enterprise, for The Wine Society- and countless others = these words ring hollow. Bad policy and bad outcomes for business, for consumers and for the Treasury.’

The announcement comes after industry bodies feared the hike in taxes on beer, wine and spirits would have a ‘catastrophic’ impact on pubs, which have been crippled following the Covid pandemic and cost-of-living crisis.

Mark Riley, WSTA chairman and Managing Director at Edrington UK today warned businesses were ‘still reeling from damaging hikes and the Chancellor’s decision to increase them again is only going to inflict more misery on British businesses’. 

Pubs and drinks firms previously expressed concerns Ms Reeves would use the state of the public finances to justify an increase in alcohol duties.