Wage inflation shows 'pressure' on margins
According to the latest Labour Market Report from the Office for National Statistics (ONS), released Tuesday 12 November, average weekly earnings in the food and accommodation sector rose by 12% to £581.64 in Q3 2024, up from £518.01 in Q2 2024. The figures marked the highest quarter on record, according to the ONS.
Employment in leisure and hospitality increased by 0.22%, which was the first year on year uplift since Q3 last year. Vacancies in the sector continued a downward trend at 94,000 in the three months to October 2024, from 98,000 in July 2024.
RSM UK head of leisure and hospitality Saxon Moseley said: “Despite some respite last quarter, another sharp jump in wages highlights acute staffing challenges and pronounced pressure on wage inflation, and in turn margins.
Bracing for impact
“With vacancies continuing a downward trajectory and employment slightly up for the first time since Q3 last year, operators look to have re-evaluated operations ahead of the National Minimum Wage increase in April 2024 to mitigate the impact on costs.
“However, if staffing efficiencies have already been made, businesses will find it more difficult to protect margins, and ultimately the viability of roles and the business, when faced with the additional tax headwinds post-Budget.
“When you consider the cost of employing a full-time employee could increase by up to £2,500 with the proposed NIC changes, National Minimum Wage increases and the extra compliance burden, the industry is bracing for impact and many businesses could be facing a financial cliff edge.”
It comes as 90% of venues reported struggling with extreme costs, with 40% warning unless support is received they could be forced to close within the next six months, according to figures from the Night-Time Industries Association (NTIA).
Meanwhile, data from the British Institute of Innkeeping (BII) earlier this week showed one in four (25%) independent pubs are set to fail as a result of the hikes in unemployment costs and business rates announced in the Budget.
Shoots of recovery
According to the poll the cost increases will render eight in 10 (80%) pubs unprofitable.
BII CEO Steve Alton told The Morning Advertiser (MA): “Seeing the growth of wages and employment in our sector this year is very encouraging, showing the shoots of recovery for pubs and wider hospitality.
“But unless the Government reconsiders the far reaching, devastating impact of the tax rises for pubs announced in the Budget last month, we will see widespread business failure, a loss of local employment and closed pubs in communities across the UK.
“We have consistently told Government pubs can be at the heart of economic and employment growth if given a level playing field in terms of the tax burden they face.
“Instead, the Budget has heaped additional taxes onto small, essential community businesses, leaving them with no choice but to cut staffing and opening hours and increase prices at the bar, or face losing their livelihoods.”
