Today (Wednesday 22 November 2023) the Chancellor Jeremy Hunt set out the Autumn Statement. The announcement outlined National Insurance cuts, tax breaks for businesses and plans to raise both the National Living Wage and the apprenticeship rate, which would directly impact the hairdressing sector.
In addition, the the Office for Budget Responsibility (OBR) published an updated economic forecasts and an assessment of the government’s finances for the next five years.
The Chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 0.6% this year and 0.7% next. Inflation is expected to fall to 2.8% by the end of 2024 according to the OBR, down from 11.1% last year when Prime Minister Rishi Sunak took office.
The spending watchdog now expects inflation to stay “higher for longer” and that it will not drop to the Bank of England’s target of 2% until mid-2025. This is a year later than it expected in March
Jeremy Hunt said the Autumn Statement has delivered “the biggest business tax cut in modern British history” and will return tens of thousands more people into work.
Changes that are likely to affect the hairdressing industry include the rise in the National Living Wage and apprenticeship rate, tax breaks for businesses and the National Insurance being cut – which is slated to save a self-employed person roughly £350 per year.
Key points
- For almost three million workers, the government has already announced an increase in the National Living Wage, which will rise from £10.42 to £11.44 from April, with the policy also extended to cover workers aged 21 and over, rather than 23 and over. It will mean a £1,800 annual pay rise next year for a full-time worker on the living wage, while 18 to 20-year-olds will receive a £1.11 hourly rise to £8.60.
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National Insurance will be cut from 12% to 10% from 6 January. It is currently charged at 12% on earnings between £12,571 and £50,271 – and 2% on anything above that.
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The self-employed will further benefit from changes to two other areas of National Insurance specific to them. Jeremy Hunt said this would save a self-employed person about £350 a year.
- The apprentice rate is going up from £5.28 to £6.40 an hour. The apprentice rate applies to people aged under 19, or people who are in the first year of their apprenticeship regardless of age.
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The government is making permanent a taxbreak for businesses which allows them to offset investment in machinery, IT and equipment against corporation tax.
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It is also extending business rate relief for many small firms, including pubs and other hospitality businesses. He adds he will extend the 75% discount on business rates up to £110,000 discount for retail, hospitality and leisure businesses for another year. Hunt says these measures will save the average independent shop over £20,000 and the average independent pub over £12,800 next year.
The Industry's Response
We reveal the hairdressing industry's response as it happens...
Commenting on the Autumn Statement today, Caroline Larissey, Chief Executive of NHBF (National Hair & Beauty Federation) said:
"We’re delighted that the Chancellor has responded to our calls for a continuation of the 75% Retail business rates discount. Along with cuts to National Insurance, this will give very welcome relief to businesses struggling to cover overheads. Sector recovery has been slow and steady since the Spring and many businesses are still battling to clear Covid debts.
With £50m allocated to apprenticeships in key growth sectors, we look forward to hearing more about how the hair & beauty sector will be supported. Employer incentives to support education and training particularly apprenticeships are desperately needed to ensure the future talent pipeline to our vibrant, creative and innovative sector. Given rising wage costs in the spring, sector employers, mostly small and micro businesses, won’t be rushing to take on new staff without additional support."
The Salon Employer's Association (SEA) responded:
"Our worst fears are being realised. For the Hair Salons and Barbers we represent, The Autumn Statement has made our future even more bleak. We didn’t think that was possible.
Why? There is a massive loophole in the Hair Industry caused by the disparity in VAT, that the government is turning a blind eye to that is creating a divide so big that it threatens to kill the future of the industry. The Autumn Statement makes the situation worse.
The Hair Industry is like no other business on the high street
● Around 35p in every £1 is paid in tax by employed salons
● vs the high street of perhaps as low as 12p in every £1
THE IMPACT OF THE AUTUMN STATEMENT
● 21% in cost to pay wages for Apprenticeships from January 2024
● Leading to redundancies, specifically NVQ Apprenticeships + Front of House
● Mental health at an all time low in our industry
● Our survey from Q2 shows the following
● 55% of business unsure or very unsure if they can continue to trade
● With 30% either having a difficult time having lots of sleepless nights or The most stressed ever and really close to breakdown