Businesses to hike up prices and cut hours after Budget

The Budget was a hammer blow for pub landlords and restaurant owners due to the “perfect storm” of increasing employers’ National Insurance contributions, the rise of the minimum wage and a reduction of business rates relief.

So, despite Labour’s promise to protect "working people", business owners in the East say they will be forced to put up their prices and cut staff or hours.

Phil Cutter, landlord of The Murderers pub in Norwich, said the changes are going to cost him between £35,000 and £40,000 extra a year.

Phil Cutter, landlord of The Murderers pub in Norwich's Timber Hill (Image: Denise Bradley) “Business rates alone are going to cost us about £20,000 extra a year and wages could be anything up to an extra £500 a week,” he said.

“National Insurance contributions will be around another £40 to £80 a week, depending on how many staff hit that criteria.

“Unfortunately, it looks as if we’ve got no option but to put our prices up.

“Some of our staff won’t see as many shifts or hours as they did as we will need to trim the fat off hours that aren’t really needed.

“But our commitment is always to our staff, so the price will end up being passed on to our customers.

“The economy hasn’t benefitted from what the chancellor is trying to achieve because although the minimum wage is going up it will be counteracted by prices going up as well.”

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Employers' National Insurance contributions are set to rise by 1.2pc to 15pc from April next year, which the chancellor says will raise £25bn a year to spend on public services such as the NHS.

The threshold is also being lowered so businesses will start paying National Insurance for staff earning more than £5,000 a year.

Chancellor Rachel Reeves leaves Downing Street before delivering the Budget (Image: Jordan Pettitt/PA Wire) Minimum wages rising will also come at a significant cost to employers. The minimum wage for over 21s, known as the National Living Wage, will rise by 6.7pc, going from £11.44 to £12.21 from April 2025.

For someone working full time, or a 37.5-hour week, that equates to £23,873.60 a year up from £22,368.06.

The minimum wage for 18 to 20-year-olds will increase from £8.60 to £10 an hour, and apprentice earnings will go from £6.40 to £7.55.

And perhaps the biggest threat to the hospitality industry is the replacement of the current 75pc relief on business rates, which is due to expire in April 2025, with a discount of just 40pc, up to a maximum of £110,000.

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Paul Sandford, landlord of the Railway Tavern in Dereham, said it’s “another nail in the coffin” for the region's pubs.

“National Insurance alone adds an extra £10,000 onto our wage bill each year,” said Mr Sandford, who employs ten members of staff. 

“We now have to decide whether we cut their hours, cut jobs, or whether it’s even worth opening.

“It could be the final straw for a lot of pubs that are already struggling.”

Paul Sandford, landlord of The Railway Tavern in Dereham (Image: Newsquest) The chancellor announced that from February next year there will be a 1.7pc reduction in draught beer duty, shaving “a penny off a pint in the pub”.

However, rates on non-draught products, such as wines and spirits, are set to rise in line with inflation. Mr Sandford has said this will cancel out anything gained by cutting draught beer duty.

“It’s a perfect case of giving it to you with one hand and snatching it away in the other,” he said.

“The public see it and think they’re going to go to the pub and get a penny off their pint, but it won’t happen because it never gets passed down to us from the breweries.”

Nick M

The average price of a pint of draught lager (Image: ONS) Marcus Pearcey owns 11 hospitality businesses in the region, including the Oaklands Hotel, Salhouse Farm Shop and Café and the former Vodka Revolution bar in Norwich, which is set to reopen as Kerry’s café and club later this month.

Mr Pearcey, who employs more than 300 people, believes the chancellor has created an “unfriendly business environment” with her autumn Budget.

Marcus Pearcey owns 11 hospitality businesses in the region, employing more than 300 staff (Image: Denise Bradley) “We’ve got a government with an agenda to fund public services, but the problem for the hospitality sector is the margins aren’t huge. So every pound you suck out of the industry has to come from somewhere, whether that’s from putting our prices up or reviewing our own labour budgets."

Business owners also fear for the future. Although there will continue to be no inheritance tax due on combined business assets under £1m, above that there will be a 50pc relief at an effective rate of 20pc from April 2026.

Mr Pearcey added: “What hurts me the most is before, when I handed over my business assets, that was separate from inheritance tax. But now they’re saying that you have to put all the risk in and do all the things that business owners have to do, but despite all that risk they are going to take 20pc of the value of your business.

"That’s a longer-term issue. Long-term they are making it an unfriendly place for businesses.”

Looking to the future

For some firms in the region, there are still reasons to stay positive.

“It's easy to pick out the negatives of the Budget, but how we react to it is in our control," says David Scott, chief executive of Suffolk hotel group The Hotel Folk and chairman of The Suffolk Coast Destination Man. 

“The new national minimum wage rates are great news for our staff, and I support them earning more to cope with the increase in living costs.

“We now need to find more innovative ways to continue to deliver. That doesn’t mean cutting corners, it means reviewing and analysing all aspects of how we operate."

Mr Scott points out that the Budget contained some good news. Shops, cafes and pubs, for example, received a partial reprieve from a jump in business rates due next year. 

"This is security on relief for an additional year with a commitment to a plan for more support in the future," he said.