An Exeter hairdresser is among UK salon owners urging the chancellor to throw the sector an “economic lifeline” as a new report highlights how an unbalanced tax system is “decimating” the industry.
Nathan Plumridge, owner of Darts Farm-based Energy Hair, has warned VAT costs are “killing the industry”.
His business, which employs 25 staff, is also about to see its wage bill rise by £50,000 following Rachel Reeves’ national insurance (NI) hike for employers.
“It’s not a pretty picture for the industry,” he told Business Live. “It’s really alarming. When you look at the amount of salons shutting down and then reopening up as a self-employed salon. It’s having an impact on education and standards.”
Mr Plumridge says the main issues for salon owners are increased NI contributions and rates of pay. He says the costs will make a “massive dent” in the number of apprentices business like his can afford to take on.
“Business are not going to be employing as many people because of the cost and it stifles growth. A lot of salons are still reeling from the impact of Covid and the problems are being compounded by these other financial challenges.”
The entrepreneur says salons are “cautious” about hiking prices, but rising costs may mean there is no option but to do it.
“If nothing is announced [in the Spring Statement], it will lead to more closures within the sector. It’s a micro industry and run generally by owner operators who are on the floor… people are still feeling the impact of Covid and any additional pressure is coming out of the bottom line. So what do you do?”
According to analysis commissioned by independent consultancy CBI Economics, unless changes are made within the industry there will be no new apprenticeships by 2027 and a 93% fall in employment by 2030.
The British Hair Consortium, which represents 50,000 UK hairdressing professionals, is calling for Rachel Reeves to halve the VAT salons pay on labour costs to 10% to help them overcome recruitment challenges.
“Our industry has been ignored for years and we’re calling on the government to correct decades of mismanagement,” said Toby Dicker, co-founder of the British Hair Consortium. “Most owners haven’t had a pay rise in many years and simply can’t consider expanding their business, let alone take on an apprentice.
“A one-size-fits-all tax system doesn’t work and has created an unlevel playing field. Increasing numbers of owners are either closing their salons or changing their employment practices and are renting chairs to contractors just to survive. This report shows how cutting VAT to 10% won’t cost the Government a penny. It would save salons across the country and ensure the future of our industry which sits at the heart of the high street.”
Mr Dicker said changes in the Autumn Budget had made it “very hard” for salons to continue to offer the benefits of employment. “This will kill the future of our industry,” he added.