New industry report highlights strong support for VAT reform as salons look for ways to grow despite rising employment costs and economic pressure
A new service industry status report from the British Hair Consortium covering hair, barbering and beauty businesses has revealed that 94% of respondents believe reducing VAT to 10% would help their businesses grow.
The report, based on 430 responses collected between December 1, 2025 and January 31, 2026, offers a snapshot of trading conditions across the professional hair and beauty sector following the Autumn Budget 2025.
Of those surveyed, 89% operate high street businesses, with 340 VAT-registered businesses taking part.
Respondents included 373 employers, 57 self-employed professionals and a total workforce of 5,594 employees represented in the results.
The survey suggests that while the sector is facing significant economic pressure, many beauty businesses believe policy changes such as VAT reform and stronger industry regulation could help unlock future growth.
Employment costs remain the biggest challenge for salons
According to the report, rising employment costs are the number one concern for businesses.
When asked to select their five biggest business challenges, respondents highlighted:
- 78% – Employment costs including national insurance and pensions
- 53% – Managing employee wage expectations
- 52% – VAT being too high with no concessions
- 48% – Lack of a level playing field between business models
- 43% – Business rates
These results underline the financial pressure many labour-intensive service businesses are currently experiencing.
The report notes that salon owners feel rising costs – including VAT, business rates and minimum wage increases – are placing significant strain on high-street businesses.
VAT reform seen as the biggest opportunity for industry growth
Despite the challenges, the report highlights a clear solution that many businesses believe could unlock growth.
When asked what changes would allow their business to grow:
- 94% said reducing VAT to 10%
- 65% said creating a level tax playing field and lowering the VAT threshold
- 50% said providing financial support for apprenticeships
The findings show overwhelming support for VAT reform, particularly for labour-intensive sectors such as beauty services.
Respondents also emphasised the need for financial support for apprenticeship training, with many saying it would help businesses invest in developing the next generation of industry professionals.
Many salons say they will raise prices following minimum wage increases
The survey also asked businesses how national minimum wage increases would affect their operations.
More than half of respondents (53.5%) said they plan to increase prices for clients to offset the higher labour costs.
Other responses included:
- 20.2% planning to reduce employee working hours
- 12.8% planning to reduce headcount
- 13.5% reporting other impacts, such as profit reductions or uncertainty about the future.
Turnover pressures continue across the sector
The survey results also indicate mixed trading conditions across the hair and beauty industry.
When asked about turnover performance over the previous six months:
- 36% said turnover was worse than the same period the previous year
- 18.6% said turnover was better
The report notes that trading conditions leading up to the Autumn Budget contributed to ongoing cost pressures for service-based businesses.
Jobs at risk across the hair and beauty sector
The survey suggests that job security is a concern for many businesses following the budget.
According to respondents:
- Seven in 10 say 10% or more jobs are at risk within the next 12 months
- Eight in 10 say 10% or more jobs are at risk beyond 12 months
Meanwhile, 70% said they are unsure whether their business will still be open in 12 months’ time, while more than half of PAYE employers are considering closing their business within the next year.
Strong industry support for regulation
The report also revealed overwhelming support for stronger industry regulation.
When asked whether the sector should be regulated:
- 99% of respondents supported regulation
- 94% called for mandating the Act of Hairdressing 1964
According to the report, this level of support is consistent with industry surveys conducted over the past five years.
What the findings mean for beauty professionals
The results highlight the economic pressures facing high-street beauty businesses, while also showing a clear consensus around potential policy changes that could support the sector.
In particular, the report points to VAT reform, apprenticeship support and regulatory structure as key factors that businesses believe could help strengthen the future of the hair and beauty industry.
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