Cinemas warn tax hikes may cause credits to roll

The UK cinema industry has warned that higher taxes on employees’ wages announced in the Budget will be the final straw for some venues in what has become a core cultural industry.

Chancellor Rachel Reeves increased the amount employers have to pay in NICs by 1.2 per cent, and lowered the wage threshold employers must start paying the tax from £9,100 to £5,000.

“We already know that many are considering reducing operating hours or pulling back on recruitment plans, but it is inevitable that it may lead to the closure of some sites,” chief executive of the UK Cinema Association, Phil Clapp, said.

The tax change will primarily affect industries which rely heavily on labour, as hospitality does. The industry is particularly exposed to the threshold change, as businesses tend to hire many part-time workers which were previously exempt from the tax.

However, Clapp added: “The impact of changes… will not only affect those [lower-paid] staff but also those at higher rates of pay, who will understandably want to maintain ‘differentials’ with more junior staff.”

‘Post-Covid, we’re pretty lean as it is’

Clapp expected the cost impact to be in the double figures for many, but said costs would naturally vary from company to company.

Larger companies, who employ more staff, will face a higher overall bill, while smaller operators, who have less cash and thinner margins, will face smaller bills but lack the capacity to absorb increases.

Simon Burke, co-founder of Revolting Spaces – a collection of LGBTQ+ hospitality venues in London which owns independent cinema The Ardzner – said that the additional tax will compound previous issues with energy bills and rental costs.

“The whole sector, especially the lower-margin areas such as independent theatres and cinemas, are going to take a hit as a result of the incoming tax environment. These taxes are nothing but political choices.

“Cinemas are culturally important spaces, these changes will undoubtedly lead to independent cinemas struggling to stay open or to expand,” he said.

Burke suggested that the government needs to step in to support the industry with business rates, a VAT reduction, and a “crackdown on energy companies and corporate landlords squeezing us beyond viability”.

Britain has lost 54 cinemas over the past four years, according to the UK Cinema Association, while a survey by the Independent Cinema Office last year found 45 percent of indie cinemas were operating at a loss.

“We are not against raised taxes at all – but that kind of raise is really substantial… We are a charity. We are fulfilling a social impact, cultural impact [agenda]. We are not putting our profits to shareholders like some of the big chains are,” Clare Reddington, CEO of Bristol venue Watershed told Screendaily.

“We are certainly having to ask ourselves really serious questions before any new hires are made,” Reddington added. “I don’t think we will reduce our staff because post-Covid we are pretty lean as it is – but we are certainly asking the staff who work for us to do more.”

Will cinema prices rise?

The UK’s hospitality and retail bodies, as well as many individual businesses, have warned that prices will have to rise as a result of the cost pressures.

However, Clapp said that this is less likely for cinemas.

“Pricing is very much an issue for individual companies and venues but there is an understanding that audiences remain conscious of costs so I think it unlikely many will feel able to pass all of this additional burden on to customers,” Clapp said.

The director of Acton Arts, the organisation which oversees the running of the independent Act One cinema, said that the cinema has no plans to raise prices.

“We feel confident that we can [deal with] the extra costs imposed on us… We’ve got a very loyal customer base, a lot of members. We think there are better times to come ahead,” he added.

He said that price rises may come from the cafe the cinema runs – like The Ardzner – instead of screenings.

“It may be that some price increases are seen in that area more than ticket pricing, but we’ve not made any hard and fast decisions yet,” he said.