Beauty industry to face £400 million increase in staff costs post Budget

The beauty industry will see a 4.6% increase in staff costs due to the introduction of fiscal measures set out in the Budget, according to a new report commissioned by the British Beauty Council.

Budget measures, including the National Minimum Wage increase and changes to the National Insurance thresholds and rates, mean the industry will face over £400 million annual increase in staff costs, which is the equivalent of almost 20,000 jobs.

Combining wage increases and alterations to NI, along with new employment measures and business rates challenges, means beauty’s staff costs are set to hit £9.5 billion.

In a statement, The British Beauty Council said: "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."

As a result, the British Beauty Council is calling for:

• Tax reform including a reassessment of VAT policy, specifically focussing on the current VAT threshold cliff-edge, which deters growth of businesses particularly those with high labour costs.
• An evaluation of the unintended consequences such as lay-offs, employment freezes, forced self-employment, disguised employment and an increase in the underground economy.
• A wholesale review of business rates to create a tax system that’s fit for the 21st century.