The results from the latest NHBF State of the Industry quarterly survey show that the dip in business confidence across a number of indicators has now bedded in. As such, the NHBF (National Hair and Beauty Federation) is calling upon the Chancellor, Jeremy Hunt, to provide further support for hair and beauty businesses in the upcoming spring budget.
More businesses are making a loss, and the trend of businesses raising their prices continues along with reliance on government support, uncertainty around survival and stagnant growth aspirations.
The sector has benefitted from vital support over the last two years, but is now facing a renewed survival challenge. As such, the NHBF is calling on the Government to take urgent action through the following five-point plan to protect the sector from the key challenges that it faces:
1. Targeted support on energy bills
While the NHBF was relieved that the Government would be providing some level of support to sector businesses via the Energy Bill Discount Scheme, the reality is that many will see the discount swallowed up soon after April 2023.
Energy costs are the first or second largest outgoing for nearly two thirds (64%) of hair and beauty salons and barbershops. Our quarterly survey from September 2022 showed that, for half of businesses, energy costs had increased by over 40%, with some experiencing increases of 300-400% or more. A third of businesses told us that their contracts would come up for renewal over the next 3-6 months and that they risked paying significantly higher prices, despite the fact that wholesale and retail prices were stabilising.
2. Wider business support
Hair businesses need crucial help with fixed overheads to maintain cashflow and keep them in business as energy costs, and other additional costs, rise. In some cases, business owners are not paying themselves a full wage in order to support members of staff (and their families) who they have nurtured and developed over many years.
The overwhelming concerns at the moment in terms of direct impact on the business are energy costs (86%), increased cost of trade suppliers (66%) and increases to the National Minimum Wage and National Living Wage (NMW/NLW) rates (54% in January 2023, increased from 36% in September 2022). The most common actions that businesses are taking in response to these rising costs include removing any non-essential expenditure (67%), putting up prices (66%) and reducing costs or making cost efficiencies.
Businesses put up prices in response to the rise in the NMW/NLW in April 2022. However, it is a balancing act; businesses can only raise prices so far before reaching the limit of what the market will bear, particularly in the face of squeezed disposable incomes.
3. Securing future sector talent
As a people-orientated sector, businesses are desperate to provide meaningful careers to more young people. However, in a sector made up predominantly of small and micro-businesses, it is simply unaffordable in the current climate to take on apprentices. Unfortunately, we have now reached the stage where some hair businesses are proactively letting apprentices go because they cannot afford to keep them.
4. Urgent review of taxation which is disincentivising growth
The NHBF calls on the Government to carry out an urgent review of VAT, which is disincentivising small business growth.
It is clear from ONS Statistics that there has been an increase in smaller businesses below the VAT threshold (£85,000) and a reduction in larger businesses paying VAT.
5. Crackdown on tax evading businesses
The NHBF is also calling on the Government to target resources for a crackdown on informal hair businesses operating on a cash basis, failing to declare earnings or not paying income tax or VAT, which means they charge lower prices, undercutting and threatening the survival of responsible businesses and undermining pay legislation.
This would include addressing the issue of ‘disguised employment’ in the sector where either intentionally or unintentionally the business is not following HMRC guidelines on the self-employed. Rather than being a genuine chair or space renter in the business, the individual is really an employed member of staff – but the business is doing so in order to pay lower rates of tax compared to nearby competitors. We are open to discussions with HMRC as to how we could more effectively communicate current guidelines to businesses and support an enforcement campaign.
NHBF Chief Executive, Richard Lambert, commented: “The sector has benefitted from vital support over the last two years, but we are now in the midst of a renewed survival challenge. We ask the Government to take urgent action through our five-point plan to protect the sector. The personal care sector has significant potential to contribute to economic growth and ‘building a better future’ for Britain. However, acting on our recommendations outlined is crucial in order to secure the survival of the sector through the recession and cost of doing business crisis.”