Budget measures, including the National Minimum Wage increase and changes to the National Insurance thresholds and rates, mean the beauty services industry including hairdressing and beauty therapy will see a £190m rise in costs, according to a new report.
The report by Pragmatix Advisory, commissioned by the British Beauty Council, has highlighted the impact of proposed tax increases and found the service sector will be hit harder than other areas of the beauty industry.
The beauty industry as a whole – including retail, hairdressing and beauty services, and wholesale manufacturing and selling of products – will see a 4.6% increase in staff costs due to the introduction of fiscal measures set out in the Budget.
This equates to a £400m in staff costs, which is the equivalent of almost 20,000 jobs, according to the report.
The second-hardest hit segment of the industry, after beauty services, will be beauty retail, which will see staff costs rise by £160m.
The reduction in National Insurance threshold (from £9,100 to £5,000) coupled with the increase in rates of contributions will cost the industry £260m.
The combination of wage increases and alterations to NI, along with new employment measures leading to more red tape and business rates challenges, means beauty’s staff costs are set to hit £9.5 billion.
With over 70% of businesses in the industry being SMEs (employing fewer than five people), the sector will face unique challenges in the wake of these measures.
The British Beauty Council said in a statement: “These measures show a clear failure to recognise that the vast majority of businesses in the UK are SMEs. Placing the burden on business to shoulder the majority of tax increases, particularly those with an almost 90% female workforce, is unlikely to lead to the benefits that the Treasury thinks.
"Instead, it will most likely prevent wage increases and deter people from hiring more staff therefore stifling growth. The beauty industry already has a growing movement towards self-employment, a fundamental issue with recruitment and a marked decrease in apprenticeships of over 70% – this will only exacerbate these challenges.
"Pragmatix Advisory, founded and run by Mark Pragnell, former managing director of the CeBR, has found that the ‘hairdressing and other beauty treatment’ sector will see a £190 million per annum increase in staff costs whilst beauty and personal care retail stores will face a £160 million rise."
To mitigate these cost increases, industry bodies including the British Beauty Council and NHBF are calling for tax reform including a reassessment of VAT policy.
They are also calling for an evaluation of the unintended consequences such as lay-offs, employment freezes, forced self-employment, disguised employment and an increase in the underground economy as wholesale review of business rates.
