A bitter blow? Pubs and restaurants brace for rise in national insurance

An increase in NICs, and a rising living wage, is leading to predictions of a hiring freeze across the hospitality sector. But not every economist agrees

- Richard Partington

It's very tough. We're really being forced to question whether this is viable," says Dan Brod, who has spent the past 16 years building his small chain of luxury pubs and restaurants in England's idyllic south-west.

From next weekend, the owner of the Beckford Group, alongside almost one million other businesses, will be hit with a combined £25bn rise in employer national insurance contributions (NICs) as Rachel Reeves's autumn budget measures come into effect. With a worsening economic backdrop, the fear is the change will only make matters worse.

"My personal politics are slightly left of centre, but it seems odd the government is asking us to raise prices and employ less people," Brod says.

Last week at the spring statement, the Office for Budget Responsibility (OBR) said Reeves's tax changes were contributing to falling recruitment and rising redundancies. Coupled with a 6.7% increase in the national living wage from Tuesday, to £12.21 per hour for those aged 21 and over, the Bank of England has also warned employers are freezing hiring plans.

The chancellor argues the money is badly needed to plug a shortfall in the government finances left by the Conservatives with the position made significantly worse by soaring borrowing costs and a weak economic outlook while providing sufficient cash to fix Britain's battered public services.

Her critics, however, say taxing employment could be a counterproductive solution.

"It was a cardinal error. I understand the thinking, but it is a case of the politics overtaking the economics," says Charlie Bean, an ex-OBR board member and former Bank of England deputy governor. "There has been enough pushback from business and it's becoming clear what the adverse effects are. But any chance of U-turn? From an economic point of view that would be sensible, and raise the money elsewhere." Bean would have preferred a rise in income tax, employee NICs, or VAT.