British Beauty Council calls out UK budget plan for projected rise in beauty industry costs

The British Beauty Council reports that increasing the minimum wage and insurance will result in an annual increase of over £400 million (US$508 million) in staff costs, equivalent to approximately 20,000 jobs. These changes in the UK budget will extend across industries, including personal care businesses.

The British Beauty Council commissioned Pragmatix Advisory to assess the impact of minimum wage and employment tax-related measures announced in the Autumn 2024 Budget. Hairdressing and beauty services are indicated to experience the highest increase in staff costs at £190 million (US$241.3 million), followed by beauty retail at 160 million (US$203.2 million). 

“These measures show a clear failure to recognize that the vast majority of businesses in the UK are SMEs. Placing the burden on business to shoulder the majority of tax increases, particularly those with an almost 90% female workforce, is unlikely to lead to the benefits that the Treasury thinks,” says The British Beauty Council.

“Instead, it will most likely prevent wage increases and deter people from hiring more staff, therefore stifling growth. The beauty industry already has a growing movement toward self-employment, a fundamental issue with recruitment and a marked decrease in apprenticeships of over 70% — this will only exacerbate these challenges.”

The National Minimum Wage will go from £11.44 to £12.21 (US$14.53 to US$15.51), which, in conjunction with the National Insurance loss, will cause a 4.6% jump in annual staff costs, found Pragmatix Advisory. Hairdressing services are expected to be hit the hardest by the UK’s Autumn Budget plan.

The reduction in the National Insurance threshold from £9,100 to £5,000  (US$11,557 to US$6,350) coupled with the increase in rates of contributions will cost the industry £260 million (US$330.15 million).

Beauty business costs

Within the industry, the “hairdressing and other beauty treatment” sector will see a 4.3% yearly increase in staff cost and “Retail sale of cosmetic and toilet articles in specialized stores” face a 6.1% rise.

In response to Pragmatix Advisory’s findings, the British Beauty Council is calling for tax reform. It wants a reassessment of VAT policy, with a focus on the current VAT threshold cliff-edge. The council claims these budget policies deter the growth of businesses, particularly those with high labor costs.

It also asks for an evaluation of the consequences that could occur from the changes, such as layoffs, employment freezes, forced self-employment, disguised employment and an increase in the underground economy.

Lastly, the council requested a wholesale review of business rates to create a tax system “fit for the 21st century.”

The price of inflation

The wage increase comes during workers’ worries about inflation and its impacts on day-to-day affordability. Beauty companies have been feeling fiscal pressures and calling on the government for action.

Last month, leading British retailers in beauty retail called on the UK government to help their bottom line by cutting business rates by 20%. Over 70 retail CEOs wrote a letter pleading for the government to “level the playing field” for retail properties. The British Retail Consortium told Personal Care Insights that it is essential to assist UK retailers since the region has been losing 1,000 shops a year.The British Beauty Council says increasing the minimum wage could result in layoffs.

However, while higher inflation has had adverse impacts, it has also contributed to growth in the beauty sector. Various data suggest inflation is starting to cool, but Oxford Economics still sees growth of 3% next year — higher than the 1% average for the overall UK economy.

Moneyboat, a short-term direct lender offering loans, found that many UK consumers are also finding ways to cope with higher inflation, spending more of their disposable income on self-care and beauty. It reported that 35% of the UK population dedicates extra funds to beauty products, exercise and other self-care activities.