For years, hotels, restaurants and pubs in Britain have comprised the most heavily taxed hospitality industry in Europe.
There’s no logical reason for it and it’s killing us.
Other countries’ governments do not apply such brutal, punishing levies on the sector and as a direct result, their businesses are flourishing.
But in the UK, we are being throttled by national insurance increases, the surge in rateable values, soaring food cost inflation, the repeated rises in minimum wages, and multiple other factors.
I am pleased to hear that the cries of despair from my colleagues and friends in the pub industry have finally been heard – they will get 15 per cent off business rates from April, although that support will only last until 2029.
But it is a token offering that fails to address the scale of the problem – or indeed, other sectors in dire need of help, like mine.
Every hotelier I know is suffering. Many are on the brink of going out of business – and yet there have been refusals from Labour to hear our warnings.
According to UKHospitality figures, the industry paid £54 billion in taxes during 2022. Almost all the firms stumping up that money are small-to-medium-sized businesses.
My own is probably one of the larger ones, at least regionally. As general manager at Champneys Eastwell Manor near Ashford in Kent, I have 140 people on my payroll to manage the 74 bedrooms, Spa, Health Club and 55 acres of grounds: as well as all the people in food and beverage, including our superlative chefs, and the busy housekeeping teams, we employ everyone from maintenance assistants to spa therapists, front of house operators, people in sales, accounts and a fitness team. In every possible way, we make a valuable contribution to our region. Yet the government seems intent on taxing us to the point of oblivion.
Most damaging of all now, are the increases associated with rateable value which is due to go up in April by at least 100 per cent – with rates increasing over £80,000 to nearly a quarter of a million pounds. That is going to have an astronomical impact on our profitability – out of our annual turnover of £9 million, we’ll be left with next to nothing.
I started working in the hotel industry, aged 15, quickly discovered I loved it, and eventually took a degree in International Hospitality and Tourism Management at the University of Surrey. That was 25 years ago, when hoteliers could rely on some basic rules of thumb that helped balance the books.
One of the most fundamental was that we aimed to operate at no more than ’30 per cent payroll’. That meant just under a third of annual turnover was devoted to paying the staff. Other costs, such as food and drink, linen, maintenance and of course taxes, swallowed up another 45 per cent.
If things were going well, that left 25 per cent taxable profit, which usually provided the income of the business owner. Very few hotels can hope to achieve anything close to that now. Most will be spending 35 per cent or more of their turnover on staff wages. Some could be laying out as much as 40 per cent.
Add to this the inflation in food prices, which has been running as high as 19 per cent a year – far above the headline inflation rates – and we’re lurching very close to the point when a business becomes loss-making. And it has been exacerbated by the repeated increases in the national minimum wage. Like all responsible employers, I am a great supporter of fair pay. We want to support our staff, and because we do, we reap the benefits of loyalty and stability.
But the government doesn’t seem to understand that every time staff costs drive a business under, the minimum wage becomes irrelevant – because everyone loses their job.
Following 2024’s Budget, the impact of the minimum wage on Eastwell Manor was about £85,000. We expect a further leap of about £65,000 this year. That’s before we factor in the added pensions contributions and the massive increase in National Insurance payments, which are costing us tens of thousands of pounds more.
The temptation is to leave vacancies unfilled when staff move on or take on more senior roles. But that means workloads increase, which in an industry as stressful and physically demanding as hotel work is harsh.
When I look at the government front bench, or politicians in general for that matter, I see very few who understand that simple equation. You need to have worked in the industry to appreciate that most people are not doing it simply to earn a wage. They love their jobs – but if the Chancellor keeps turning the screw on them, the pain will begin to supersede the love.
As people get older, their families grow and need to be supported financially. If the hotel business becomes an industry where staff can no longer afford to have children, we’re finished.
The same is true if rateable values keep going up exponentially, and if National Insurance keeps rising.
For thousands of hotels and others in hospitality, this is the point of no return. If Labour continues to refuse to support us, the consequences will be truly appalling.
James McComas is general manager at Champneys Eastwell Manor
