Business Budget backlash builds as hospitality giants write to Chancellor

The government is under increasing pressure to revisit its hikes to employer national insurance contributions and the minimum wage after a number of the UK’s largest employers voiced concerns about the impact of the changes on their costs and operations.

Over 200 of the UK’s biggest hospitality businesses signed a letter to the Chancellor yesterday warning that the additional tax bill will force some businesses into liquidation and that others will have to drastically reduce their headcount and slash investment in order to meet the additional costs imposed by Labour’s first Budget.

The open letter to Rachel Reeves (pictured), signed by Premier Inn-owner Whitbread, Wagamama operator The Restaurant Group and pub giant Marston’s, also comes as several of the UK’s major supermarkets have begun to reveal the true cost of the employer national insurance contributions (NICs) rise to their business.

Tesco, the UK’s largest private employer, faces a £1bn increase to its national insurance bill over the course of this parliament, according to Morgan Stanley analysis published yesterday. And rival supermarkets Sainsbury’s and Asda both revealed last week that they were expecting to pay an additional £140m and £100m respectively in employer NICs.

Wetherspoons founder Tim Martin also used a trading update last week to disclose his pub chain faced added costs of approximately £60m as a result of measures unveiled in the Budget.

Martin said the effects of the tax rises would be further amplified by the simultaneous hike to the national living wage. The government chose to apply an above-inflation rise of 6.7 per cent to the minimum amount employers can legally pay staff; a figure which rose to over 16 per cent for staff aged 18-20, which Labour ultimately wants to bring to parity with workers of all ages.

The parallel hikes led the boss of Asda to describe the Budget as a “big burden” for the supermarket that would lead to his firm hiring fewer staff. And Marks and Spencer boss Stuart Machin told the Telegraph that he “can’t rule out” future price rises.

The open letter, coordinated by the hospitality trade body UK Hospitality, also criticised the changes the government made to the threshold at which employers need to start paying NICs. As well as raising the overall rate of employer NICs by 1.2 per cent, the government cut the threshold significantly from £9,100 to £5,000, sucking in millions of low paid and part time workers.

Kate Nichols (pictured), UK Hospitality’s chief executive, said the changes were “unsustainable” for the letter’s signatories, branding the threshold cut “regressive in [its] impact on lower earners”.

Despite the dire warnings from British employers, Treasury minister Darren Jones suggested that larger companies should be willing to stomach the NICs rise.

Asked in an interview with the BBC’s Laura Kuenssberg if the message the government wants to send to larger firms was “tough – suck it up”, the chief secretary to the treasury said: “Bigger businesses are more able to burden some of the contributions we need to make to the state,” adding: “There are measures more broadly in the Budget which we think are good for business, good for growth but on tax contributions yes it has been designed in that way.”

A spokesperson for HM Treasury said: “More than half of employers will either see a cut or no change in their national insurance bills, and to support businesses we’re permanently cutting business rates for every shop on the high street from 2026.”

Tesco declined to comment.