Pub bosses warn tax hikes driving youth unemployment crisis

Pub bosses have warned that Labour tax hikes are driving the youth unemployment crisis, which is pushing the UK towards an “economic catastrophe”. 

Several hospitality leaders have called on the government to reverse its increases to employer national insurance contributions (NICs), which pubs say are making it harder for them to hire young people.

Last week, former health secretary Alan Milburn published his interim report into youth joblessness, which he dubbed an “economic catastrophe” caused by social media and the welfare state.

Milburn’s review found that Labour’s NICs hikes “added to the cost of employment” and hit the retail and hospitality industries the worst, which he said are typically “the easiest points of entry into work” for young Brits.

This tax increase added around £4,000 to the annual cost of hiring a young person, he said.

On top of this, the government has come under fire for hiking the national minimum wage to £10.85 per hour for those aged 18 to 20 and £12.71 per hour for those aged 21 and above.

Labour has said it plans to scrap age-based wage bands altogether, which it claims are discriminatory. 

But pub bosses have rounded on the government’s employment policies following Milburn’s review, claiming it has become harder than ever to hire workers. 

Labour must ‘think radically’ to boost jobs

Nick Mackenzie, chief executive of pub chain Greene King, called on the government to “think radically” to enable pubs to tackle youth unemployment, by reforming the business rates system and cutting VAT.

He said: “While the reasons behind rising youth unemployment are complex, an undeniable factor has been the decisions taken by various governments to increase costs for employers. 

“Combined with wider pressures, this has created a perfect storm for businesses and inevitably reduced the number of jobs available for young people.” 

The chief executive of Shepherd Neame, Britain’s oldest brewer, said the firm has hired 15 per cent less people in the past year, despite applications for bar roles jumping 41 per cent in the same period.

“Day by day we are seeing the impact of this bad policy and it’s only going to get worse, not better,” Jonathan Neame said.

David McDowall, chief executive of the UK’s biggest pub company, Stonegate, said the NICs increases have caused the cost of an entry-level hire at his company to jump by £1,200.

“I implore the chancellor to reverse the increase in NICs to give our sector, and the wider UK high street, the support it needs to reinvigorate youth employment.

“We don’t lack the desire to hire young people; we lack the economic breathing room to do so,” he said.

Tax hikes ‘incredibly painful’

Allen Simpson, the chief executive of trade body UK Hospitality, said the government should have treated the loss of 100,000 jobs following Labour’s NICs hike at the 2024 Budget as a “canary in a coal mine”.

“The solution is to reduce the cost of employment for hospitality businesses. The Government needs to make it economically beneficial to employ young people once again,” he said.

The boss of ten-pin bowling giant Hollywood Bowl told City AM last week that the hikes to national insurance contributions and the minimum wage have made it harder for his company to hire.

Stephen Burns, the company’s chief executive, said these “incredibly painful” tax hikes threaten the ability of firms like his to act as so-called gateway employers.

A government spokesperson said: “We know leisure and retail businesses are facing a difficult time, but cutting wages for the lowest paid during a time of global uncertainty is not the answer.  

“The Budget allowed us to stabilise the economy and deliver support for families and businesses, and with working people facing the brunt of the cost-of-living crisis, it is only right we increased the minimum wage to support millions of UK workers.”