Budget NI shock dampens Suffolk landlords' beer tax cheer

East Anglian pubs group boss Philip Turner was bracing himself for a big increase in his staffing costs as a result of the Budget - but he now faces a far bigger financial hole than he was expecting.

His huge half a million pound "black hole" is largely the result of a swingeing rise in Employers' National Insurance contribution (NIC) costs.

Chancellor Rachel Reeves' unexpectedly announced she would be lowering the threshold at which the tax is levied as she sought to raise a total of £40bn in extra taxes without adding to wage-earners' tax burden.

Philip Turner of Chestnut Group (Image: Sarah Lucy Brown) Instead of paying NIC on salaries above a £9,100 threshold, from April 2025 it will apply to anything over £5k.

It means that where Philip - who heads up the Chestnut Group - was expecting to pay around £270k extra to employ his 650-strong workforce due to increases in minimum wage and an NIC rise of 1.2%, he now faces an additional bill of more than £500k.

Employers with four workers or fewer don't pay Employers' NIC - but Philip believes that the hospitality industry as a whole - and especially seaside seasonal businesses - will be very hard hit.

"It's horrendous," he said. "The businesses that are going to be hugely affected are those businesses that employ younger people and flexible and seasonal workers."

Employers already knew from announcements on the eve of Budget Day they would have to foot big rises in the minimum wage next year, which will go up by 6.7% to £12.21 an hour (just over £23,800 for a full-timer) for a full-time worker.

This is less than than the Conservatives' minimum wage bump last year taking it from £10.42 an hour to £11.44 but will mean pressure on other parts of the wage structure where wages  will inevitably go up as a result.

"She's just ripped a big hole in businesses' investments," said Philip. "It will be a massive concern. It's going to have an impact on how we recruit people, how we allocate hours to people."

He gave the Budget a "100% thumbs down" - but had less of an issue with the minimum wage rise. "That's going into the pockets of people and you will see that going round and round the economy."

Tom West, who with wife Josie Merrick owns the Jolly Good Pubs group - gave the Budget a thumbs sideways as he worked out he would be paying around £101k more as a result of it.

hjTom West and Josie Merrick of Jolly Good Pubs  (Image: Sarah Lucy Brown) He owns the Lord Nelson in Ipswich, Marlborough at Dedham and Red Lion at Manningtree, and calculated that with his 63-strong workforce he will see a rise in nearly £39k in his NIC bill.

The minimum wage increase and consequent pay rises for more senior workers will see that rise by £56k and the loss of some of his business rates relief - reducing from 75% to 40% will add another £6,500 to his overall costs.

To cover the extra costs the average cost of a pint would have to rise from about £5.20 to about £5.60, he said. 

"The increase is going to hit us and we are going to have to pass on that cost to customers," he said.

"I'm nervous for what the average consumer is going to have in their pockets," he admitted. "If their spending habits are not going to change then I'm optimistic they will continue to spend at the current level."

He added: "I think as a Budget she has done a very good job of balancing the books and making it come across as fairly well balanced - but I'm concerned there are stealth taxes in there."

The hospitality sector as a whole was squeezed more than other businesses, he felt, but in recent months he has seen a big boost in sales - up 22% or 18% year-on-year over his three sites.

Ipswich Town FC being promoted had boosted sentiment and town pride and optimism was shining through, he said. 

But the draught beer duty cut was "helpful", he said. "We are pleased to see pubs recognised in that way. That's fantastic. We would like to see more of that."