How will the autumn budget affect the beauty industry and what can businesses to do prepare? BABTAC & CIBTAC’s CEO comments…
Yesterday, Chancellor Rachel Reeves, as the first female chancellor, announced Labour’s Autumn Budget plans, with a goal to “drive economic growth”.
A crucial part of the economy, the beauty and personal care industry contributed a combined £27.2bn to the UK economy in 2023[1] .
Looking at the potential impact of the budget’s plans on businesses, CEO and Chair of BABTAC & CIBTAC, Lesley Blair MBE comments…
But first, a reminder of the key points covered within the budget were:
- Employers’ National Insurance contributions will rise from 13.8% to 15%
- The threshold at which businesses start paying National Insurance on a workers’ earnings will be lowered from £9,100 to £5000
- Employers will be able to claim up to £10,500 on their National Insurance bill, up from £5000.
- Minimum wage for apprentices will increase from £6.40 to £7.55 an hour
- Minimum wage for employees to increase to £12.21 an hour next year
BABTAC comments on the potential knock-on effect from businesses to employees, all the way to customers…
“For small businesses continuing to navigate the current financial climate, the continuation of business rates relief, which was set to end at the end of March 2025, is positive (although at 40% as opposed to the previously 75%) and the increase on employment allowance will certainly help to temporarily lighten the load for smaller beauty businesses.
However, the increase in National Insurance payments for employers to 15% is likely to put a further strain on some businesses, increasing employer costs that may have a knock-on effect for not only the employee, but customers too. As employer overheads increase, we may expect to see lower wage increases affecting day-to-day spending and disposable income, potentially resulting in more people feeling the pinch and cutting back on non-necessities. For some businesses, they may feel the need to increase prices for their customers in order to cover any losses.”
A stronger investment in emerging talent is necessary
“As one of the leading awarding bodies for education within the beauty industry (CIBTAC), we are continuously reminded of the exceptional talent within our industry and the value of investing in people. It’s positive to see that the government listened to calls for an increase in Employment Allowance, increasing from £5,000 to £10,500, allowing businesses to fund apprentices, incentivise employment and staff retention. However, with the increase of minimum wage and National Insurance contribution, sadly this might not be enough to make it commercially viable for businesses to take on apprentices.”
What steps can salon businesses take to prepare for the financial changes? Lesley explains…
- Don’t bury your head in the sand when it comes to financials
“It can be really tempting to bury your head in the sand when it comes to working out how increased overheads will affect your business. However, the best thing you can do is to get familiar with, and stay on top of, your numbers to avoid any unforeseen surprises. Whether it’s yourself that manages finances, or you have the help of a dedicated expert, ringfence some time to understand the full picture with the addition of National Insurance and wage increases, so you can be armed with the facts.”
- Strategise and crunch the numbers
“Once you’ve worked out how much additional revenue would be required to cover any increases to employee wages and outgoings, this is where you want to plan ahead and strategise. Ask yourself questions like ‘How much would the average client bill need to be with our existing client base?’ and ‘How many more clients would we need to acquire to cover any difference?’ to understand what steps you may need to take.”
- Explore new streams of income
“As well as exploring options like increasing your price list, you might wish to enhance your existing offering by introducing new treatments to your customers. If training to offer a new service isn’t possible right now, explore how you can offer packages that speak to the modern-day client – whether it’s express services for busy clients, multi-service packages or treatments for special occasions.”
- Enhance your customer loyalty
“The current financial climate naturally means that customers are more deals-conscious than ever before, which can mean they aren’t as loyal as they may have once been. As well as thinking about their experience in the salon, consider how you can increase their loyalty outside too. Refer-a-friend schemes, loyalty programmes, bespoke offers and setting up marketing tools like regular e-newsletters will help to make you front of mind and drive them back into your salon, sooner.”
[1] Research conducted by Oxford Economics, British Beauty Council’s Value of Beauty Report 2023-2024