The NHBF's new report reveals the £139m cost impact of the 2024 Autumn Budget on the UK hair and beauty sector, with 72% of businesses planning to raise prices and 45% expecting staff reductions.
The National Hair & Beauty Federation (NHBF) has revealed the financial impact of the 2024 Autumn Budget on the UK’s hair and beauty sector.
A new report titled Straightening out The Costs, prepared by Pragmatix Advisory, predicts that businesses in the sector will face an additional £139m in costs due to rising wages, National Insurance changes and the reduction of business rates relief.
This report builds on five years of the NHBF's State of the Industry surveys, which track sector performance and reveal the ongoing challenges faced by businesses, many of which continue to recover from the pandemic's aftermath.
Despite this, the sector, which contributes £5.8bn annually to the UK economy and employs over 220,000 people, now faces significant financial strain.
Key findings
According to the report, the hair and beauty sector will bear an additional £139m in costs, even before businesses make any operational adjustments.
Labour costs alone are expected to increase by £100m, a rise of 4% across the sector.
The report outlines the following critical changes:
- 72% of businesses will be forced to increase their prices
- 45% plan to reduce staff hours
- 45% intend to cut employee numbers
This would mean, on average, businesses will lose 2.7 full-time staff and 1 apprentice.
The financial impact
The financial strain extends beyond just operational costs. The NHBF’s research indicates:
- Sector profits are projected to decline by 15%
- Sector turnover is expected to drop by £20m
- Corporation tax revenue from the sector is set to fall by 17%, from £240m to £200m
Overall, the sector’s total tax contribution will decrease by 4%, which amounts to a £44m loss across the industry
There is also a trend toward self-employment in the sector. Approximately 19% of businesses (around 9,370 businesses) plan to transition to self-employed models, which could reduce the tax receipts by an additional £40m.
Caroline Larissey, chief executive of the NHBF, commented, "This detailed analysis confirms our worst fears about the combined impact of wage increases, National Insurance changes, and reduced business rates relief.
“Our sector, which employs predominantly women and young people, is facing unprecedented pressure to either raise prices significantly or fundamentally change business models – with serious implications for jobs, training and high street vitality."
Rebecca Munro, director at Pragmatix Advisory Ltd, highlighted the long-term consequences: "The NHBF’s State of the Industry survey tells us that hair and beauty businesses plan to respond to the measures announced in the Autumn budget by cutting staff, increasing prices and changing business models.
“Our modelling demonstrates that these measures will have a negative impact on profits, employee incomes, and even the public purse.
“Government can expect to see a decrease in tax contributions from the sector."
The impact on apprenticeships and skills shortages
The report warns that the skills shortage within the sector is likely to worsen.
As fewer salons take on apprentices due to financial pressures, the industry may see fewer young people entering the sector.
This exacerbates the challenge of addressing the skills crisis that has already been documented in previous NHBF reports.
In the medium and long term, these challenges could lead to a significant reduction in the number of apprenticeships and training opportunities in the sector, which could harm the future workforce of the industry.
Larissey emphasises the urgent need for action to protect the apprenticeship system and ensure the future success of the industry: "Without action, we risk losing not just jobs, but the training infrastructure that has been the backbone of our sector."
NHBF’s proposed solutions to address financial strain
In response to the growing challenges, the NHBF has submitted five key proposals to the government ahead of the fiscal statement on March 26:
- Urgent VAT review
- The NHBF calls for an immediate review of VAT to level the playing field between employers and self-employed workers. This includes consideration for reduced rates or a smoothing mechanism to eliminate growth disincentives.
2. Targeted support for apprenticeships
- £3,000+ apprenticeship incentives per employee to help cover training costs.
- Flexible completion options for apprentices who have completed 12 months of training.
- Development of 'Portable' Flexi-Job Apprenticeships for those aged 19 and over.
- Enhanced support through the proposed Growth and Skills levy.
3. Business rates reform
- Business rates reform to support sector growth, particularly for small businesses with multiple salons at the local level.
4. Energy supplier flexibility
- Additional flexibility from energy suppliers to help businesses cope with ongoing high utility costs.
5. Enhanced HMRC resources
- Increased resources from HMRC for both enforcement and sector-specific advice, ensuring fair competition across the sector.
The Survive and Thrive initiative
In light of these challenges, the NHBF has launched its
Survive and Thrive initiative.This programme is designed to support businesses, offering month-by-month practical support, including:
- Business adaptation tools
- Employment guidance
- Political engagement resources
- Professional excellence development
The initiative focuses on helping businesses prepare for and navigate through the upcoming changes expected in April 2025.
Larissey concluded, "Our Survive and Thrive initiative demonstrates the sector's resilience and determination to adapt.
“However, government partnership through our proposed measures is crucial to protect not just individual businesses, but the future of our apprenticeship system and the vital role our sector plays in local communities and the wider economy."
