UK hospitality businesses have signed a letter addressed Chancellor Rachel Reeves, stating that the rise in employment costs would cause “unprecedented damage” in the sector.

The letter was signed by UKHospitality CEO Kate Nicholls, and was supported by over 200 signatories, including Bidfood UK, Young’s and Stonegate Group.

It warned that the cost increases will cause:

• Small business closures within a year
• Businesses to reconsider investment plans
• Jobs to be “drastically” cut
• Hours for team members to be reduced
• Contract caterers to struggle to meet important public sector catering contracts for schools, hospitals and prisons

Signatories put forward two measures to mitigate impacts:

• Creating a new employer NICs band from £5,000 to £9,100 with a lower rate of 5%; or
• Implementing an exemption for lower band taxpayers working fewer than 20 hours per week to target support for part-time and lower paid workers

The letter said: “The changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon. Unquestionably they will lead to business closures and job losses within a year.

“The threshold change brings many team members into Employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.”

The letter continued: “There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8%, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more. Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.

“We know you are determined to ensure that growth is available to all. Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.

“We therefore ask that you consider measures to protect businesses who employ lower earners. We understand that these proposals come at an immediate financial cost, but we are absolutely firm in our belief that the lost growth potential which would result from inaction would be substantially more expensive, for the economy, for society and for the public finances.”