Hairdressers have warned that ‘the industry as we know it is finished’ unless Labour reforms the tax system at the Budget.
The British Hair Consortium – which represents 50,000 hairdressers – has urge]d the Chancellor to intervene to prevent a wave of job losses and salon closures.
A new survey of more than 350 employers has revealed that three quarters of salons plan to hire fewer apprentices, raising concerns about how young people will get a foot in the door.
The number of apprenticeships in the sector has plummeted 82 per cent since 2020 and the industry group is afraid it could reach zero by 2027.
It also said salons are now sacking staff and bringing them back on a self-employed basis to avoid the tax hikes and costs associated with Labour’s reforms of workers’ rights.
Over half of the sector could be in this so-called ‘hidden’ economy by 2028, the trade body predicted.
Hair salons have asked Rachel Reeves to help protect their ability to hire young people
The group said that 9 in 10 salon owners are in support of the VAT threshold for salons being lowered to cut down on tax avoidance and stimulate growth.
At the moment, if a hairdresser, salon, or barber shop earns more than £90,000 in a year, they must register for VAT with HMRC.
But hairdressers fear that ‘record’ numbers are dodging paying VAT, costing the Treasury billions in lost revenue.
They want a lower VAT rate of 10 per cent on labour costs to help salons compete.
Toby Dicker, co-founder of the British Hair Consortium, said: ‘Rachel Reeves urgently needs to level the tax playing field in the Autumn Budget.
‘It’s a problem that’s been brewing for over 20 years – but it’s now a crisis that’s unfolding at pace to the detriment of jobs, young people, and the Treasury.
‘With labour taxes hitting us five times harder and VAT hitting us harder than any other high street sector, the incremental increases in these over the last 20 years have finally broken salon employers. This tax gap is now unsustainable.
‘It’s not an exaggeration to say we’re now at the ‘last chance saloon’. Unless the Government levels out the playing field with regards to tax, the industry as we know it is finished.’
Salons have already been hit hard by Chancellor Rachel Reeves’s £25 billion National Insurance raid. She both increased the rate paid by employers and lowered the threshold at which the levy kicks in. Firms were also hit by an inflation-busting increase in the minimum wage.
And Reeves is reportedly considering upping the minimum wage by around 4pc, from £12.21 to at least £12.70, at next month’s Budget.
Job losses in this sector will take the heaviest toll on female workers, with the CBI finding that 84 per cent of those employed in the industry are women.
James Talbot, co-founder and director of HARE, which operates three studios across Oxfordshire, called the sector ‘the most taxed’ on British High Streets.
‘We’re entrepreneurs and want to grow our businesses and employ more people but the structural unfairness of the VAT system is holding us back.
‘We chose to pay our taxes, run fully transparent operations competing against others who rely on cash-only models, this creates an imbalance which destroys fair competition, stifles growth and drives entrepreneurs out of business.’
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