Whilst the National Hair and Beauty Federation are pleased with the extension of free childcare and cap on energy bills, there are still many more issues to be resolved, including declining apprenticeships and the VAT threshold:
Commenting on the Spring Budget announcement, Richard Lambert, Chief Executive of NHBF said:
‘It can’t be a ‘growth Budget’ with no action on the VAT threshold which is acting as strong disincentive to growth for small and micro sector businesses.
The UK can’t be the ‘best place in the world for female entrepreneurs’ with hair & beauty businesses clinging on by their fingertips and a gaping hole in employer support for apprenticeships. As a result of exponential increases in energy and business costs, some employers are now tragically being forced to let go apprentices because the numbers simply don’t add up anymore. So much for supporting the next generation of entry level British talent’.
Whilst the investment zones, support for childcare and ‘Returnerships’ may benefit some in the sector, there is little to offer immediate relief to businesses locked into extortionate energy contracts. We call on the Government and Ofgem to facilitate urgent talks with suppliers to at least allow business contract payments over a longer period of time’.
In order to project the sector from the key challenges that it faces, the NHBF is calling on the Government to take further urgent action through their previously requested five-point plan:
Targeted support on energy bills
Whilst the NHBF was relieved that the Government would be providing some level of support to sector businesses via the Energy Bill Discount Scheme, the reality is that many will see the discount swallowed up soon after April 2023.
Energy costs are the first or second largest outgoing for nearly two thirds (64%) of hair and beauty salons and barbershops. Our quarterly survey from September 2022 showed that, for half of businesses, energy costs had increased by over 40%, with some experiencing increases of 300-400% or more. A third of businesses told us that their contracts would come up for renewal over the next 3-6 months and that they risked paying significantly higher prices, despite the fact that wholesale and retail prices were stabilising.
Wider business support
Businesses need crucial help with fixed overheads to maintain cashflow and keep them in business as energy and costs rise. In some cases, business owners are not paying themselves a full wage in order to support members of staff (and their families) who they have nurtured and developed over many years.
The overwhelming concerns at the moment in terms of direct impact on the business are energy costs (86%), increased cost of trade suppliers (66%) and increases to the National Minimum Wage and National Living Wage (NMW/NLW) rates (54% in January 2023, increased from 36% in September 2022). The most common actions that businesses are taking in response to these rising costs include removing any non-essential expenditure (67%), putting up prices (66%) and reducing costs or making cost efficiencies.
Businesses put up prices in response to the rise in the NMW/NLW in April 2022. However, it is a balancing act; businesses can only raise prices so far before reaching the limit of what the market will bear, particularly in the face of squeezed disposable incomes.
Securing future sector talent.
As a people-orientated sector, businesses are desperate to provide meaningful careers to more young people. However, in a sector made up predominantly of small and micro-businesses, it is simply unaffordable in the current climate to take on apprentices. Unfortunately, we have now reached the stage where some businesses are proactively letting apprentices go because they cannot afford to keep them.
Urgent review of taxation which is disincentivising growth.
The NHBF calls on the Government to carry out an urgent review of VAT which is disincentivising small business growth. It is clear from ONS Statistics that there has been an increase in smaller businesses below the VAT threshold (£85,000) and a reduction in larger businesses paying VAT.
Crackdown on tax evading businesses.
The NHBF is also calling on the Government to target resources for a crackdown on informal businesses operating on a cash basis, failing to declare earnings, not paying income tax or VAT, which means they charge lower prices, undercutting and threatening the survival of responsible businesses and undermining pay legislation.