On-trade gives mixed reaction to living wage pledge

Gaëlle Laforest

08 July 2015

The UK on-trade has given a mixed reaction to Chancellor George Osborne’s summer budget.

As well as cuts in corporation tax during the lifetime of this parliament, down to 19% in 2017 then 18% in 2020, Osborne also pledged to introduce a ‘minimum living wage’ from April 2016, set at £7.20, for working people over the age of 25.

A centrepiece of the conservative government’s plan to turn Britain into a ‘high wage, low tax economy’, the introduction of the minimum living wage drew a mixed reaction from the on-trade.

While venues generally agreed with the intentions behind the move, some operators suggested that its implementation could drive people out of business.

‘It is encouraging hearing the Chancellor talk about the need to create more jobs and giving employers greater powers to invest in their staff and businesses,’ said Kate Nicholls chief executive of the Association of Licensed Multiple Retailers.

‘[But] we need to remember that there are significant pressures already being placed on pubs and bars in terms of labour costs. A mandatory rollout of the living wage would only increase the financial burden on pubs and bars that are already dealing with substantial legislative and regulatory costs. Additionally, we have seen […] increased pension costs for employers.

‘Pubs and bars that are able to pay the living wage have the opportunity to do so, but we should be aware that many businesses face incredibly tight margins,’ she concluded.

When asked how he felt about the announcement, Stuart McCluskey, of The Bon Vivant, The Devil’s Advocate and El Cartel in Edinburgh, was ambivalent. ‘I’d have to make actual calculations. If [the difference between the increase in wages and the decrease in corporation tax] equates exactly, then fantastic, that’d help us, but if it doesn’t, there will be consequences for businesses. It will affect people in different ways.

‘With the added pressure of increased pension contributions, there seems to always be something to put pressure on small businesses,’ he continued. ‘We can’t automatically put our prices up to be able to afford to put up salary to living wage, or businesses would close down.’

Meanwhile, the British Beer & Pub Association welcomed the announcement. ‘Some of the measures, such as the living wage and reductions in tax credits, will have a knock-on effect on the cost of employment for pubs, so the tax cuts announced today are a welcome and necessary balancing measure,’ said Brigid Simmonds, chief executive of the BBPA.

‘As well as the tax cuts announced, we will be looking to see that the Government continues to support brewing and pubs in other parts of the tax system, such as through future action on business rates and further cuts in beer duty, which are a big help to pubs.’

The Living Wage Foundation, which sets the independent living wage that has been so far adopted by only a small selection of businesses around the UK, said they were ‘delighted’ by the announcement but noted that Osborne’s initial £7.20 figure, while a significant improvement on the present rate of £6.50, is still well below the £9.15 amount the Foundation set as the London living wage. They also questioned the wisdom of omitting under-25s.

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