Travel industry leaders have expressed concern that the Labour government’s Budget measures today will likely hike employment costs.
Chancellor Rachel Reeves is expected to increase business taxes by £20 billion, with a 2% rise in employers’ national insurance contributions as the biggest tax-raising measure coming on top of a 6.7% rise in the National Living Wage from next April, confirmed yesterday.
Blue Bay Travel chief executive Alistair Rowland, who is chair of Abta, warned: “If the government puts up employers’ national insurance by 2% on top of a rise in national living wage it’ll be a hell of a hit for smaller businesses. Fixed costs will be significantly higher. The payroll could go up by 7% from April.”
He suggested businesses “would either consolidate head count or bonuses”, adding: “It’s going to be painful.”
Julia Lo-Bue Said, chief executive of the Advantage Travel Partnership, agreed, saying: “Any cost increase is a blow when businesses are already squeezed on margins, and there is such political instability.
“It’s a concern for our sector. Increased costs don’t mean increased revenue. A lot of businesses are carrying debt and paying higher interest rates. Owners have been trying to manage debt and invest in people.
“Businesses will have to make difficult decisions because it’s difficult to pass these costs on. Does it mean they can’t add staff or can’t reward staff?”
Aito executive director Martyn Sumners said: “The government has said it wants to stimulate growth and help small business, but there is concern that measures in the Budget will adversely impact SMEs.”
He warned that margins are already “very tight”.
The chancellor is also expected to increase tax on wealthier taxpayers and extend the current freeze on income tax thresholds.
Rowland said the Budget would mean “the cost of sales going up”, arguing: “Are you going to sell more holidays or put prices up, and could that hit sales?”
He added: “The market in September and October has generally been flat. People have been at best passive. The big thing will be what happens to foreign exchange.”
Rowland suggested that post-Budget: “We would take the pound at $1.30”.
The pound was valued at $1.30 on Tuesday, having risen from $1.26 ahead of the July general election and $1.22 a year ago.