BHC Report: Govt Must Halve VAT To Save Salons

Employment and apprenticeships will be decimated unless there’s action, warns explosive industry report

by AMANDA | INFORM

No new apprenticeships by 2027 and a 93 per cent fall in employment by 2030 – those are the stark findings from an incendiary British Hair Consortium (BHC) report on the future of UK salons unless the government halves VAT.

The report – by independent consultancy CBI Economics and based on responses from more than 2,000 salon owners and professionals – highlights how an unbalanced tax system is decimating the industry, largely because the sector is far more labour intensive than most other high street businesses, with limited chances to reclaim VAT costs. This is leaving VAT-registered businesses at a disadvantage, particularly with the rising levels of ‘disguised employment’. The latter described the practice of hiring contractors to avoid VAT and NI payments.

This unlevel playing field sees employers often contributing more than double the tax (12 per cent more) than the disguised model. The industry 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. The continuing drop in employment would create a sector “largely devoid of the employment rights that come with being an employee”.

The report also noted that cutting VAT on salon labour costs would be hugely cost-positive, potentially reversing the decline in VAT registrations.

“A ‘one size fits all’ tax system doesn’t work and has created an unlevel playing field. This report shows how cutting VAT to 10 per cent 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” – Toby Dicker, BFC co-founder

Rising costs that are due to hit in full force in April following Chancellor Rachel Reeves’ Autumn Budget, have exacerbated the crunch for many salon employers. With the Spring Forecast due in five weeks, the BHC – which represents 50,000 UK hairdressing professionals – says the government must act urgently on VAT.

To show your support, the BHC is urging salon owners to visit bhc.co.uk to download the report and personalise the templated letter, which can be emailed to local MPs.

The BHC is a working group representing all areas of the UK personal care sector, including the Salon Employers Association, Salon Owners United, the Hair & Barber Council, the Freelance Hairdressers Association, the Men’s Hairdressing Federation and the Fellowship for British Hairdressing.

Reaction From Salon Employers

“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.” – Laura Geary, director at Headmasters, one of the UK’s biggest salon groups and one of the largest providers of apprenticeships

“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.” – Charlie Collinge, director at Collinge & Co, Liverpool

“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.” – Denise Thomas, owner of Denise Thomas Hair Salons, in Liverpool