The Chancellor, John Healey, has been alerted that the hospitality sector faces a potential annual loss of 300,000 jobs for young people unless the National Insurance (NI) burden is reduced in the upcoming Budget.

UK Hospitality, a trade body representing the sector, stated that the industry has already experienced a loss of 100,000 jobs over the past two years following a previous increase in employer NI contributions. The organization is advocating for a reduction in the current tax burden to mitigate further job losses.

This warning comes in the wake of a pledge made by Tory leader Kemi Badenoch to halve NI contributions for companies employing workers under the age of 25. Businesses such as hotels, pubs, bars, and restaurants were reportedly surprised when former Chancellor Rachel Reeves announced a £25 billion NI increase in her 2024 Budget, a move that also significantly impacted retailers.

The NI hike raised the employer NI rate from 13.8% to 15% and, crucially, lowered the salary threshold at which the tax becomes due from £9,100 to £5,000. This change made it considerably more expensive for hospitality and retail firms, which often rely on low-paid or part-time staff, to employ workers.

This policy has been widely attributed to a slowdown in hiring across various economic sectors. UK Hospitality has intervened ahead of the Budget, emphasizing that while the industry currently facilitates 300,000 job starts annually for individuals aged 16 to 24, its capacity to do so is threatened without measures to alleviate the sector's tax obligations.

The organization is proposing that the government progressively increase the salary threshold for employer NI to £10,000 by the end of the current parliamentary term. Allen Simpson, Chief Executive of UK Hospitality, highlighted the sector's historical role as a major job creator for young people, noting that a third of all initial jobs for those under 25 are in hospitality.

'That job creation superpower has been put in jeopardy over the past two years, with hospitality hit by more than £5 billion in extra costs,' Simpson stated. He added that without action, the sector's ability to provide these entry-level positions would be at risk, leading to further job and opportunity losses.

Simpson also suggested that reducing employment costs could contribute to addressing the 'NEETs crisis,' referring to the nearly one million individuals aged 16 to 24 who are not in education, employment, or training.