Salon owners are calling on Chancellor Rachel Reeves to throw the sector an economic lifeline, with a new report highlighting how an unbalanced tax system is decimating their industry.
New findings warn that unless things change, there will be no new apprenticeships by 2027 and a 93% fall in employment by 2030. This would leave very few in employment, creating a sector largely devoid of the employment rights that come with being an employee.
With the Spring Forecast due in five weeks, the British Hair Consortium – which represents 50,000 UK hairdressing professionals – says the Government must urgently halve the VAT salons pay on labour costs to 10% to help them overcome the existential crisis they’re facing.
The analysis commissioned
from the independent consultancy CBI Economics – based on responses from over
2,000 salon owners and professionals – highlighted how:
- the sector is far more labour intensive than most other high street businesses with limited chances to reclaim VAT costs
- this labour intensiveness creates an unlevel playing field, with taxes impacting the sector three times as much compared to other high street operators
- VAT-registered businesses are at a disadvantage with the rising levels of ‘disguised employment’
- where contractors are hired to avoid VAT and NI payments, this creates the unlevel playing field where employers often contributing more than double the tax (123% more) than the disguised model
- by 2027 there may be no new apprenticeships offered and direct employment could plummet 93% by 2030
- the shift to self-employment has coincided with a decline in overall sectoral employment which may have cost the Treasury £2.4bn in VAT receipts alone since 2009
- cutting VAT on salons’ labour costs would be hugely cost positive and potentially reverse the decline in VAT registrations
“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,” he added.
Ireland has recognised this
and dropped its VAT on labour intensive businesses in hairdressing and
hospitality to nine percent. The change is working – new salons are popping up
and paying tax while workers are also benefiting from improved employment rights.
Laura Geary, Director at Headmasters, one of the UK’s biggest salon groups and one of the largest providers of apprenticeships in the industry said: “The changes from the last Budget have made it very hard for salons to continue to offer the benefits of employment and we will certainly not be able to take on as many apprentices going forward. This will kill the future of our industry.”
Charlie Collinge, Director at Collinge & Co, added: “Last year’s change in NI contributions has forced us to close our salon in Ormskirk in West Lancashire after 57 years of trading. Nearly all our competitors in Ormskirk are self-employed and we cannot continue to be competitive.”
“We’re also a specialist
provider of hairdressing apprenticeships – the largest in Liverpool. Last year
we had over 300 applications but were only able to find employment for 60
apprentices because fewer salons can afford to take them on. Apprenticeships
are the main route for sustainable careers in hairdressing, but the model is
under threat if there aren’t enough salons able to directly employ hairdressers,”
adds Charlie.
Denise Thomas, owner of Denise Thomas Hair Salons in Liverpool, has been a hairdresser for almost 47 years and a salon owner for 25 years. “ One of the biggest challenges I’ve faced over the years has been VAT. A growing number of salons now operate with chair renters who don’t have to pay VAT, which allows them to keep their prices low and creates an uneven playing field.
“I also worry about the future for the next generation of stylists. Who will train them? Recently I had to make the difficult decision to let my two newest apprentices go because I simply can’t afford them. My training provider has no salons on their books looking for apprentices this year, as chair rental salons don’t typically train apprentices. If salons like mine continue to be squeezed, they’ll become less and less viable, making it even harder for employers like me to secure a stable future.”
What can you do to help?
The British Hair
Consortium is desperately urging the industry to take the following action:
Head to the BHC website and everything you need is there.
1. Download the templated letter – https://www.bhc.org.uk
2. Personalise the letter where indicated.
3. Download the report.
4. Look up your local MP & email them the letter, report and link to the
video that is on the website.
