"It's going to snowball" - Looming April cost increases cause concern for NI hospitality sector

A new survey has found most hospitality venues in Northern Ireland are planning to cut jobs as a result of increased costs coming into force in April.

That's when new employment costs announced in the autumn budget kick in.

65% of hospitality businesses in Northern Ireland say they'll have to cut jobs - while more than one quarter will reduce trading hours.

Trade bodies are urging the Government to work with them and delay employer NICs threshold changes so that hospitality can continue to boost the economy

Businesses are warning they will be forced to make painful decisions to weather new costs.

A joint survey by leading hospitality trade associations of the hospitality sector in Northern Ireland has revealed how the sector fears it will be drastically affected by new employment costs and the reduction in rates relief come April.

The figures reveal that:

• 65% of hospitality businesses in Northern Ireland will reduce their employment levels, risking job losses and lost income for workers.

• 55% would cancel planned investment.

• 26% will reduce trading hours.

• 28% have no cash reserves left, a dramatic increase from 15% in Q3 2024.

• 22% believe they will have to close at least one site.

Hospitality Ulster, The British Beer and Pub Association, the British Institute of Innkeeping, and UKHospitality are highlighting the strong record the sector has in delivering economic growth, with hospitality one of the top contributors to GDP growth in November and December 2024.

They said a delay to the changes to the employer NICs threshold would avoid the immediate impact on jobs and investment revealed in the survey. Instead, it would allow hospitality to deliver economic growth further and faster.

When asked how the Government could support the sector, businesses cited a reversal of employer National Insurance Contribution changes as the second biggest priority after a lower rate of VAT for hospitality.

In a joint statement, the trade bodies said:

“These figures should serve as a clear warning that pubs, brewers, and hospitality venues will be forced to make painful decisions to weather these new costs, which will have damaging impacts on businesses, jobs and communities.

“At a time when hospitality has been one of the top contributors to economic growth, the last thing the Government should be doing is piling on costs that will impact employment and cut off our ability to grow.

“We want to work with Government so we can continue to vitally boost the economy, which is why we urge them to delay the changes to the employer NICs threshold. This would help save jobs and allow the sector to continue on its growth path.

“If it doesn't act then businesses are clear that the impact on communities, employees and supply chains will be significant. They have warned about potential lost earnings, lost jobs, reduced trading hours and, in some cases, business failure. This would mean the loss of essential community hubs that would otherwise drive the local economy and create jobs.

“Our message to Government is to delay its changes to the employer NICs threshold and allow hospitality to continue to deliver economic growth, regenerate our high streets and support local communities.”

William Farmer owns a local business in County Down. ‘Bay Tree Café’ has been a family run business in Holywood for around 40 years.

Mr Farmer spoke to CoolFM/Downtown exclusively, telling us he does not know how businesses will fare come April: “It’s going to have an impact on not just me, but the whole of the industry.”

“Businesses are going to close, there is going to be a lot of independent businesses like mine that won’t be able to cover the costs. Or they’ll have to make difficult decisions that will have an overall impact on service, on the experience. It’s multi-layered, it’s going to snowball and have an impact on thousands of people.”

“We provide the texture to the local experience. Tourism and hospitality go hand in hand. If you remove independent, imaginative, passionate people, it just becomes plain.”

The café owner said the increase in costs have been the topic of conversation among businesses in the town for quite some time now. Here is some of the things other business owners have been saying:

“I wonder how many will close this time, we’re being squeezed.”

“It’s all going to have a knock-on effect as business owners are forced to react to make difficult decisions.”

“For example, younger staff are going to be everywhere on lower hours, which means higher staff turnover. I can only see difficult decisions being made that will cause harm to the industry.”

Since COVID Mr Farmer has kept his enthusiasm and passion for the business, despite having an extremely difficult five years.

However, he said: “April is coming, and we don’t know what is going to happen. It’s just going to be another challenge. There will be businesses that won’t overcome it.”

Mr Farmer said he won’t be cutting staff, as his team has been with him through COVID, so they will ‘weather the storm together.’ But he did say cutting costs will have to be a priority unfortunately.

He said he would love to see a conversation in government surrounding lowering VAT for the hospitality sector, as it’s so important for Northern Ireland's economy.

Colin Neill, Chief Executive, Hospitality Ulster, said:

“The results of this survey confirm what we have been telling politicians for years now: that the conditions in which hospitality businesses are being forced to operate will result in closures and the loss of employment. This should be the final warning for elected representatives in both Stormont and Westminster that the upcoming changes in April will be a body blow for many hospitality businesses.

“This will be especially felt in Northern Ireland, where the hospitality sector is the fourth largest employer in the private sector and the backbone of our tourism industry. While we continue to take the fight to Westminster over VAT reductions and the reversal of these disastrous cost increases, we are calling on Stormont to deliver an interim support package to safeguard against the worst of these cost increases and accelerate the process of business rates reform.”

A spokesperson for the Department of Finance said: “Finance Minister John O’Dowd raised the issue of the increase in employers’ National Insurance contributions with the Chief Secretary to the Treasury on 5 February and will use the upcoming Finance: Interministerial Standing Committee (F:ISC) meeting to highlight the adverse impacts of the taxation system with the Chief Secretary in person.”

The Treasury is defending the spending plan, and says an 18-billion pound settlement for Northern Ireland represents the largest in real terms in the history of devolution.