The hairdressing and beauty sector is facing an existential crisis, with jobs and apprenticeships forecast to be decimated, according to the results of a new report.
The report by CBI Economics, commissioned by the British Hair Consortium, highlighted how an unbalanced tax system is damaging the industry.
Hair and beauty salon owners are now calling on Chancellor Rachel Reeves to throw the sector an economic lifeline – and warned that unless things change, there will be no new apprenticeships by 2027 and a 93% fall in employment by 2030.
This would leave very few in employment, creating a sector largely devoid of the employment rights that come with being an employee.
With the Spring Forecast due in five weeks, the British Hair Consortium – which represents beauty as well as hairdressing professionals – said the Government must urgently halve the VAT salons pay on labour costs to 10%.
The British Hair Consortium x CBI Economics survey analysis
The analysis commissioned from the independent consultancy CBI Economics – based on responses from over 2,000 salon owners and professionals – highlighted how:
- The sector is far more labour intensive than most other high street businesses with limited chances to reclaim VAT costs
- This labour intensiveness creates an unlevel playing field, with taxes impacting the sector three times as much compared to other high street operators
- VAT-registered businesses are at a disadvantage with the rising levels of ‘disguised employment’ where contractors are hired to avoid VAT and NI payments, this creates the unlevel playing field where employers often contributing more than double the tax (123% more) than the disguised model
- By 2027 there may be no new apprenticeships offered and direct employment could plummet 93% by 2030
- The shift to self-employment has coincided with a decline in overall sectoral employment which may have cost the Treasury £2.4bn in VAT receipts alone since 2009
- Cutting VAT on salons’ labour costs would be hugely cost positive and potentially reverse the decline in VAT registrations
“Our industry has been ignored for years and we’re calling on the Government to correct decades of mismanagement,” said Toby Dicker, co-founder of the British Hair Consortium.
“Most owners haven’t had a pay rise in many years and simply can’t consider expanding their business, let alone take on an apprentice. A ‘one size fits all’ tax system doesn’t work and has created an unlevel playing field.
"Increasing numbers of owners are either closing their salons or changing their employment practices and are renting chairs to contractors just to survive. This report shows how cutting VAT to 10% won’t cost the Government a penny. It would save salons across the country and ensure the future of our industry which sits at the heart of the high street,” he adds.
Ireland has recognised this and dropped its VAT on labour intensive businesses in hairdressing and hospitality to nine percent. The change is working – new salons are popping up and paying tax while workers are also benefiting from improved employment rights.
How you can support the call for change
The British Hair Consortium is urging the industry to take the following action:
1. Download the templated letter here
2. Personalise the letter where indicated.
3. Download the report.
4. Look up your local MP & email them the letter, report and link to the video above, which can also be found on YouTube here.
