5 March 2025
The National Hair & Beauty Federation (NHBF) today released "Straightening out the costs," a comprehensive report by Pragmatix Advisory analysing the economic impact of the 2024 Autumn Budget on the hair and beauty sector. This latest analysis follows five years of quarterly State of the Industry surveys tracking sector performance and builds on the landmark "Careers at the Cutting Edge" skills crisis report published in early 2022.
This sustained research program has documented the sector's challenges and evolution since the pandemic, with the findings showing a concerning pattern of increasing pressure on traditional employment and training models. The sector, which contributes £5.8 billion to the UK economy and employs 220,000 people across 50,000 businesses, faces unprecedented challenges that threaten to undermine progress made in addressing the skills shortages identified three years ago.
The report projects that sector businesses face additional costs of £139 million before implementing any operational changes, with labour costs alone set to increase by £100 million (4%) across the sector.
Caroline Larissey, Chief Executive of NHBF, said:
"This detailed analysis confirms our worst fears about the combined impact of wage increases, National Insurance changes, and reduced business rates relief. Our sector, which employs predominantly women and young people, is facing unprecedented pressure to either raise prices significantly or fundamentally change business models - with serious implications for jobs, training, and high street vitality."
Key findings from the report include:
Business Response to Changes:
- 72% of businesses will be forced to increase prices.
- 45% plan to reduce staff hours.
- 45% will reduce employee numbers.
- Businesses expect to cut an average of 2.7 full-time equivalent staff and 1 apprentice.
Financial Impact:
- Overall sector profits projected to decrease by 15%.
- Sector turnover estimated to decline by £20 million.
- Corporation tax revenue expected to fall by 17% (from £240m to £200m).
- Total tax contribution projected to decrease by 4% (£44m) across the sector.
The report also highlights a concerning trend toward self-employment, with 19% of businesses (approximately 9370) planning to shift to a self-employed model, potentially reducing tax receipts by £40 million.
"These findings demonstrate why we urgently need government intervention," added Larissey. "We're calling for an immediate review of VAT to level the playing field between employers and self-employed workers, alongside targeted support for apprenticeships and business rates reform. Without action, we risk losing not just jobs but the training infrastructure that has been the backbone of our sector. At the moment, it’s a lose/lose/lose situation with salons struggling to afford to employ, young people missing out on opportunities and the government missing out on tax revenue."
The impact varies significantly by business size, with large businesses facing average increased labour costs of £163,811 (10% increase), small businesses £25,329 (7% increase) compared to micro businesses at £1,130 (1% increase) as they are supported by the increase in the Employment Allowance.
Rebecca Munro, Director at Pragmatix Advisory Ltd said:
“The NHBF’s State of the Industry survey tells us that hair and beauty businesses plan to respond to the measures announced in the Autumn budget by cutting staff, increasing prices and changing business models.
Our modelling demonstrates that the measures will have a negative impact on not just their profits and the incomes of their employees, but on consumers and the public purse. The hair and beauty industry contributes almost £6 billion a year to the UK economy, but with these new measures set to impact businesses that are still dealing with the impact of the pandemic, higher inflation and the energy price crisis, government can expect to see tax contributions from the sector decrease.
In the medium and longer-term, we can expect the skills shortage in the sector to worsen, as fewer salons take on apprentices. This is particularly concerning in a sector that is predominantly female-led and provides career opportunities for young people.”
In response to these challenges, the NHBF has launched its comprehensive 'Survive and Thrive' initiative, a transformative programme designed to support members through unprecedented changes. The programme offers month-by-month practical support including business adaptation tools, employment guidance, political engagement resources, and professional excellence development, with particular focus on helping businesses prepare for and navigate through the April 2025 changes.
The NHBF has also submitted five key proposals to government via a letter to the Chancellor ahead of the fiscal statement on 26 March:
1. An urgent review of VAT to level the playing field between employers and the self-employed, including consideration of reduced rates or a smoothing mechanism to remove growth disincentives.
2. Targeted support for apprenticeships, including:
- £3,000+ apprenticeship incentives per employee to cover training costs
- Flexible completion options for apprentices who have completed 12 months of training
- Development of 'Portable' Flexi-Job Apprenticeships for those aged 19 and over
- Enhanced support through the proposed Growth and Skills levy.
3. Business rates reform to support sector growth, particularly for small businesses with multiple salons at a local level.
4. Additional flexibility from energy suppliers to address ongoing high utility costs.
5. Enhanced HMRC resources for both enforcement and sector-specific advice to ensure fair competition.
"Our 'Survive and Thrive' initiative demonstrates the sector's resilience and determination to adapt," said Larissey. "However, government partnership through our proposed measures is crucial to protect not just individual businesses, but the future of our apprenticeship system and the vital role our sector plays in local communities and the wider economy."