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Julia Lopez (Hornchurch and Upminster) (Con)
I beg to move,
That this House has considered the impact of Government policy on the hair and beauty sectors.
It is a real pleasure to serve under your chairmanship, Ms McVey. This debate is about giving a voice to the thousands of small business owners crushed by the weight of tax demands. They are frustrated and exhausted —penalised, it seems, for doing everything by the book. They are expected to keep taking personal risks, to employ others and to pour all they have into building businesses and serving customers, even as the rewards for doing so shrink year after year. Those assumptions have bred a troubling complacency in Whitehall that these businesses will always just be there to tap up, and the crisis now gripping the hair and beauty sector is a stark example of the consequences.
High street hairdressing and beauty salons offer jobs and training to thousands of young people. These businesses are disproportionately led or staffed by women, many of whom need flexible hours to balance their caring responsibilities. We all know these people, because we have been served by them—even counselled by them—sometimes over many years.
However, today salons are under threat. The combination of the pressures they face is turning into a crisis, and the result will not just be a loss of revenue to the Treasury.
Alberto Costa (South Leicestershire) (Con)
I thank my hon. Friend for securing this important debate. Only a few weeks ago, I visited Sue Davis’s hair salon in Blaby in my constituency, and she introduced me to two of the young people my hon. Friend has in mind, Tegan and Poppy. Does she agree that the measures the Government have brought in not only damage the hair salon industry, but risk reducing the number of apprenticeships, making it possible that there will be no future Tegans and Poppys going into the hairdressing business in the first place?
Julia Lopez
That is precisely one of the issues I wish to highlight in today’s debate. This avenue of employment is being closed down for too many young people, because hiring apprentices has become far too expensive. I am sure other hon. Members are seeing apprentices being shed across their constituencies because the sheer cost of employing them makes it too difficult for salons to retain them. That is a terrible loss for those young people and for salons that need those skills and that skills pipeline.
As I was saying, the result of salons closing will not just be a loss of revenue to the Treasury: it will be young people without an apprenticeship; high streets where the empty units left behind are filled with front businesses—perhaps a dodgy nail bar, a vape shop or a barber that may not be playing by the rules; customers who lose a service that they loved and that gave them a sense of place; and entrepreneurs who wonder why on earth they bothered to do the right thing and who now question whether this country is the right place to put their energies.
I will set out the challenges facing these businesses, explain why we should all care and, finally, share with the Minister the asks from my local salons, so that we can keep these vital businesses alive, with the benefits that flow to us all. Let me start by setting out some of the pressures on high street salons.
Salons have weathered some extraordinarily difficult years with the pandemic. Take Wyndham Hair in Hornchurch, a business that has been operating since the late 1970s. Owners Johnpaul and Jane returned from covid burdened with debt due to the stop-start nature of operating restrictions. They restructured and streamlined, and are now debt-free and at their most efficient, but the business offers little more than a wage. Why? Well, VAT is a major factor.
Johnpaul and Jane chose to employ staff rather than rely on self-employed workers. That offers better security for their employees and quality control for them, but it comes with a financial penalty: as an employer, they pay VAT on services. Meanwhile, mobile or home-based businesses, or salons staffed entirely by self-employed workers, often avoid that. Those operating outside premises also duck regulatory costs such as those for trade waste, music licensing and more. That creates an unfair playing field. It is a bizarre situation, because we can effectively have two businesses, identical to all intents and purposes, operating under two different tax systems.
Hair and beauty is a labour-intensive sector, and around 60% of costs are wages. As I heard from Toby from the Salon Employers Association, salons trade in skill, not goods, and cannot reclaim VAT on their biggest cost, which is people. That pushes legitimate businesses to the brink and rewards those operating in the grey market. Self-employment is a legitimate business choice, but employment tribunal case law demonstrates that it is increasingly being used as a means of avoiding tax and employment laws. Without VAT reform, the British Hair Consortium forecasts that there will be a 93% drop in direct employment in the sector by 2030. That is not a typo; that is an emergency.
The long tail of covid and VAT were existing challenges. Rent and utilities increases also created pressure. Let us now add into that mix Labour’s disastrous October Budget, starting with the withdrawal of business rates relief. During covid, Conservatives supported high street businesses with grants and rates relief but, as of April, those have gone. Coal House Cuts in Upminster now faces a rates bill of £2,000, up from zero. The Vanilla Room in Hornchurch saw its rates bill rise from £7,500 to more than £18,000. Those are not minor figures; they are bills that keep people up at night.
Let us add in the increase in employer national insurance contributions. There is something pernicious about what the Chancellor has done here. Because of the change to thresholds, the NICs hike is hitting the types of business that employ a large number of lower-paid or part-time workers. For the Utopia beauty salon in Hornchurch that means a rise in employer NICs from £750 to £1,000 a worker. Many of its workers are single mums providing for their families, and it has already had to let go one of its tight-knit team. Because Utopia’s suppliers are facing exactly the same pressures, it is seeing cost increases of 5%, and energy and utility bills have trebled.
I am seeing an unmistakable theme in my constituency work: female business owners, with many female employees, are approaching me for the first time. I have been an MP for nearly eight years, and these are the types of people who never get in touch with their MP. To put some numbers on it, over 80% of the workforce in hair and beauty are women; 86% of businesses are female-owned; 40% of the workforce is part time, compared with 25% in the wider economy; almost one in three workers is under 30, so it is a young workforce; and 45% of the sector’s jobs are in areas with the highest levels of unemployment.
I want to say something that does not come easily to me because I loathe identity politics: it is hard to ignore the impact, let alone the irony, of a Chancellor celebrating herself for being the first woman to hold that office, while simultaneously hammering sectors that employ, serve and are often led by women.
Mr Richard Holden (Basildon and Billericay) (Con)
I thank my hon. Friend for securing this incredibly important debate. Just up the road from her in Essex, in Basildon and Billericay, well-groomed men and women are facing the same issues. I thought this was a poignant moment to intervene, because it is precisely part-time workers, many of them women, who are affected, often in female-run businesses. Does my hon. Friend agree that the combination of all these things—the increase in national insurance, the issues around business rates relief on the high street—is really hitting? But there is also concern about some of the legislation coming forward in the so-called Employment Rights Bill, which local businesses tell me is an unemployment Bill and which, rather than protecting workers, is causing more problems, because businesses just do not want people on their payrolls.
Julia Lopez
My right hon. Friend is absolutely right: this is about a series of things hitting these businesses. It is about new legislation, new taxes and the withdrawal of reliefs that had been supporting businesses. I am glad my right hon. Friend intervened, because I was in Hornchurch yesterday speaking to staff at Wyndham Hair. Johnpaul, who runs that business, is one of my right hon. Friend’s constituents, and he told me how supportive my right hon. Friend has been of his local high street, so I appreciate the support he is giving me in the debate.
As my right hon. Friend said, this is about a whole range of people sectors. It is not just about salons being hit with these staggering tax bills; it is also about the early years sector. That sector supports many other businesses that require good workers. When I talk to nurseries in my constituency, some of the bills they talk about are just unbelievable. In fact, they are so unbelievable that when I tell people about them, they do not believe it—they think the nurseries must have got their sums wrong, but that is absolutely not true.
One after-school and holiday club provider has seen her annual NICs bill go from £10,851 to £26,040. That is a small business, and it is being absolutely hammered. One nursery provider told me that the combined impact of NICs and the minimum wage is adding £30,000 to her payroll costs every month. Those are unbelievable numbers, which risk driving many nurseries to closure. That will dismantle the support network that allows many other women to go into the workplace.
The minimum wage is right in principle, but when we force a small salon with razor-thin margins to meet that extra cost on top of everything else, it becomes untenable. When we add to that the looming Employment Rights Bill, many salons are telling staff to go self-employed just to survive. That is not giving people more protections but ripping up the ones they already have.
That brings me to apprentices. Salons are letting them go very fast. For decades, this industry has opened doors for young people to learn skills and earn a living, and that ladder is being kicked away. At Coal House Cuts, the owners once proudly trained apprentices; now they cannot afford to. Wyndham Hair used to employ four apprentices; now they have one. The Vanilla Room is getting daily calls from laid-off apprentices, but it too has had to cut learner hours. Its owner, Kerry, told me:
“For the first time in 30 years, we just can’t afford to run apprenticeships. Our costs are up £28,000 on apprenticeships a year. How much does the government think salons make?”
After I put in for this debate, more stories poured in from across the country. This crisis goes beyond hair and beauty, because I am hearing the same from construction firms—another traditional route for working-class youth. Two vital pathways into work for working-class girls and boys are collapsing. Is this the future that Labour promised—a generation of young people priced out of skilled trades because Westminster could not design a Budget with small businesses in mind? That is surely the very opposite of what this Government say they want, and it is utterly incompatible with their drive to get people off welfare. Because beauty salons are facing so many different costs, they are also cutting back on training, in a sector where customers demand that they are up on the latest technologies.
So what will happen? First, there will be job losses and price hikes. One of the challenges for many salons is that their customers face the same economic headwinds, so they are spending less and visiting less often. Then there is the ultimate risk of closures. Every time a salon closes, it leaves more than just an empty unit; it leaves a void in the community—a place of connection, conversation and confidence gone. Speaking to Wyndham Hair yesterday, I heard not only about the services it offers but the support it gave its long-standing clients through covid. Those are the kinds of businesses that these people run. Utopia has clients aged 10 to 97; the 97-year-old goes to the beauty salon because it is her place of sanctuary. When legitimate businesses vanish, they are replaced by shady operations that are often fronts for illegal or exploitative practices. The rest of the high street struggles, apprenticeship routes collapse and tax receipts fall—they will not rise.
Sir Julian Lewis (New Forest East) (Con)
I know it is not the main thrust of my hon. Friend’s argument, but does she share my concern at the detailed exposés at the end of March in the Evening Standard and The Sunday Times about the huge proliferation of barber shops, which could not possibly all be conducting legitimate trade? For example, the Evening Standard talked about 17 barbers in and around a two-mile stretch of Streatham High Road, and about 25 on a similarly sized section of Kingsland Road between Stoke Newington and Haggerston. That is clearly criminal activity on a major scale.
Julia Lopez
I thank my right hon. Friend for that important intervention. As I was preparing for the debate, I read about some of the police operations in Manchester, where they have been cracking down on this kind of activity. The frequency with which they found that these were fronts for illegal businesses—often with links to international crime gangs—is deeply worrying. That is one reason why I want to raise the profile of this issue. We cannot lose legitimate businesses from our high streets, because what fills the void is something that none of us wants in our communities.
What can be done? I know how this works: the Minister sits in the Department for Business and Trade, not His Majesty’s Treasury, so he cannot give any substantive answers on the fundamental mistakes being made on tax policy. However, like any Business Minister worth his salt, he will probably share my concerns and wonder how best to get the Treasury to change course. He might even find this debate quite helpful to his own lobbying, just as the Under-Secretary of State for Education, the hon. Member for Portsmouth South (Stephen Morgan), and his officials did when I gave him evidence about the crisis now engulfing the early years.
Here are some practical asks that my salons would like the Minister to make of the Chancellor: VAT reform, with a reduced rate for labour-intensive services; the restoration of business rates relief and the overhaul of the outdated business rates system, particularly for high street premises; the revival of apprenticeship incentives; and revisiting the measures in the October Budget. Look, the Government should use global market turmoil as an excuse to mask Labour’s mistakes if that is what it takes, but let us get a U-turn on these economy-shrinking tax takes. They are not working. Confidence and employment are down. Growth projections have been halved. The tax take is going to shrink, and that will translate into a smaller pot for public services. Members do not need to take my word for it; the International Monetary Fund said so just yesterday, confirming its view that the UK’s growth prospects have been cut because of domestic factors.
To conclude, this debate must serve as a reminder that Government do not create growth—businesses and people do. Those businesses are now often paying increased rent, utility bills, professional fees, VAT and covid debt interest and, since April, giant hikes in business rates and the cost of employing people. It is just too much. People work to incentives, and right now the incentive to start a business such as a hair and beauty salon, grow it, take on staff with full employment rights and train apprentices is simply not there.
The Government say they care about growth, communities and employee rights, but their actions—I hope by accident rather than design—are crippling the very people who grow things, give heart to communities and employ people. I say to the Minister: use this debate and take these real stories, these stark warnings and the sector’s clear-eyed solutions straight to the Treasury—before it is too late.
Several hon. Members rose—
Esther McVey (in the Chair)
Order. I remind Members to bob if they wish to speak in this debate; it seems that quite a few Members want to. We will come to the Front Benchers at 5.10 pm. Although I will not set a hard deadline, speeches should be about three minutes.
Maya Ellis (Ribble Valley) (Lab)
It is a pleasure to serve under your chairship, Ms McVey. I thank the hon. Member for Hornchurch and Upminster (Julia Lopez) for securing this important debate on a sector that, as she rightly says, is often overlooked but is a critical part of many of our communities, including mine in Ribble Valley in Lancashire.
As I am sure my colleagues will reference, the hair and beauty sector is a thriving economic powerhouse, contributing huge amounts to the UK economy while increasing visitors to high streets and promoting community wellbeing. Given its impact on not only the economy but our physical wellness, we must ensure that the whole sector is regulated effectively. I want to highlight my concerns and those of the Ribble Valley residents I have spoken to about the regulation of the beauty sector in particular.
It is deeply concerning that aesthetic medicine, a medical speciality recognised by the Royal Society of Medicine, is often considered just another part of the hair and beauty sector. If it were cardiology or dermatology, there would rightly be huge concern over non-medical professionals performing high-risk procedures. Aesthetic treatments are not cosmetic extras; they can be invasive medical procedures with serious risks, including blindness, tissue necrosis and death. I have recently read several tragic news stories of individuals—such as Alice Webb, a mother of five—who have died after undergoing non- surgical treatments, including the increasingly popular Brazilian butt lift, known as the BBL procedure. No charges have been brought because it is still not illegal.
However, it was promising to hear that last December, Save Face, a Government-approved register of trusted practitioners, met with the Government to share Alice’s story and discuss potential solutions to stop untrained individuals from performing such procedures. One of my constituents, Dr Natalie Haworth, has said that as a medical professional with her own aesthetic clinic, The Doctor & Company, she has to routinely manage complications previously caused by poorly trained practitioners. Legitimate, medically-trained professionals such as Dr Natalie undergo training built on years of foundational medical education, ethical standards and regulatory oversight. A three to seven-day course cannot replicate that. The increase in unreputable training providers across social media is increasingly worrying. We must look into training standards to rectify the situation.
Across the UK, invasive procedures such as fillers, liposuction and facelifts are being performed in unregulated salons. These are overwhelmingly carried out on women, reflecting a systemic failure to take the risks seriously—often dismissed as a women’s issue or vanity. In a society where our beauty standards are shaped by social media and celebrity culture, there is no doubt that aesthetics treatments will continue to grow. In 2024 alone, the UK aesthetics industry grew by a considerable 8.4%.
Unregulated actors in this space lower the reputation of the whole industry, which in turn impacts the success of safe and legitimate services like those provided by my constituent, Natalie. We must therefore work to tackle the rise of unregulated cosmetic procedures. Will the Minister confirm whether the Government plan to follow up on the previous Government’s consultation on non-surgical cosmetic procedures? The Government must listen to women’s stories and work to act and legislate on aesthetic medicine to ensure that people’s safety is secured.
Meanwhile, the NHS shoulders the burden. A&E departments are seeing increasing complications from fillers, botox and laser treatments that should have been managed in a clinical setting. The industry must not be overlooked. We need to support trained practitioners and advocate for women seeking treatments by prioritising the raising of standards across this dynamic sector.
Bradley Thomas (Bromsgrove) (Con)
It is a pleasure to serve under your chairmanship, Ms McVey. I thank my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) for securing this important debate, about which I have had much communication from constituents, particularly those who operate their own health and beauty businesses in my constituency. Those businesses, of which we are all aware, are a cornerstone of our high street and community. They provide valuable employment; I was particularly struck by my hon. Friend’s comments about the volume of employment that they provide, particularly to female members of society. But the crisis that we face is urgent, the stakes are high and the voices of salon owners, staff and apprentices must be heard.
I would like to highlight an example from my constituency. A constituent who operates a salon in Bromsgrove got in touch. After 33 years of contributing to the local economy, creating jobs and nurturing talent, they face the heart-wrenching possibility of having to close their doors within the next 12 to 18 months. Severe financial pressures, exacerbated by Government policies, have pushed them to the brink, and without support, staff—including a promising new apprentice—may lose their livelihoods. One of the major challenges is the disparity caused by disguised employment practices. VAT-registered salons, such as theirs, are struggling to compete with establishments exploiting loopholes through which workers are falsely registering as self-employed to dodge VAT. That creates an unfair playing field, forcing ethical businesses to consider unsustainable practices simply to stay afloat.
However, the consequences of inaction extend far beyond individual salons. Industry forecasts paint a bleak picture: a 93% drop in employment by 2030, no new apprentices by 2027 and the loss of generations of talent. Rising costs—including, in this case, a wage bill of £52,000 before factoring in rent, national insurance and pensions—make it impossible for compliant salons to thrive under the current VAT threshold of £90,000. That is why support from the Government is not optional; it is essential. This salon owner, alongside many others, has taken proactive steps to bring attention to this crisis. They are a member of the British Hair Consortium and they have contributed to comprehensive dialogue with Government urging action—action that cannot wait.
I am also struck by the comment made by the hon. Member for Ribble Valley (Maya Ellis) about non-surgical aesthetic treatment; I have raised that before in the House of Commons myself. My constituent, Nicky Robinson, is quite happy to go on the public record as someone who often performs corrective action for surgery that has gone wrong. That is another dimension to an industry that presents an emerging healthcare crisis that I, too, urge the Government to address. I would also like the Minister to confirm when the Government will introduce a mandatory licensing regime that will protect not just consumers but those practising in this industry.
The beauty sector is not merely about aesthetics: it is about empowering individuals, building confidence and fostering community connections that we all know exist across our constituencies. It is time for the Government to recognise the importance of the industry and take the necessary steps to ensure its survival.
Cat Eccles (Stourbridge) (Lab)
It is an honour to again serve under your chairship, Ms McVey. I thank the hon. Member for Hornchurch and Upminster (Julia Lopez) for securing this important debate.
I was recently contacted by the owner of a local, international-award-winning hair salon in my constituency. Tim Scott-Wright runs a salon in the village of Wollaston and prides himself on training the next generation of hair stylists. Sadly, Tim does not think that he will be able to take on any apprentices this year due to the increased NICs and the increase to the national minimum wage.
It is important to say that Tim and others are more than happy to contribute a bit more to get Britain’s economy growing. However, he did not realise that it would impact his business so drastically. Tim told me about salons forced into the self-employed model to reduce costs, which can have the unintended impact of forcing workers into accidental tax avoidance. It also reduces training opportunities for the next generation. Salons are already operating on slim profit margins, and the current VAT rate places an unsustainable burden on these labour-intensive businesses. Unlike other sectors that benefit from lower VAT rates or exemptions, hair salons must pass those costs on to customers, making services less affordable and reducing demand.
A proposed reduction in VAT to 10% would provide immediate relief, allowing businesses to plan for the future and keep contributing towards our economy. I have already written to the Treasury and the Department for Business and Trade to urge the Government to consider a targeted reduction in VAT for hair salons, bringing it down from 20% to 10%. Many salons are facing severe financial difficulties due to a combination of rising operational costs, reduced consumer spending and the long-term impacts of the covid-19 pandemic. The hair and beauty industry is a vital contributor to the UK economy, supporting over 250,000 jobs and generating billions in annual revenue. Let us back our hair and beauty industry, make sure revenue is not lost in self-employed models and keep the sector thriving.
Dame Caroline Dinenage (Gosport) (Con)
It is a pleasure to serve with you in the Chair, Ms McVey. I start by congratulating my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) on securing this debate and articulating so comprehensively the issues that the hair and beauty sector face. I share her concern and frustrations, and those of the sector.
The hair and beauty industry contributes £5.8 billion to the UK economy. It is not just about how people look; it is important for our high streets, for individuals and for communities, yet the Government seem to insist on seeing the sector driven into the ground. Since the Chancellor’s spring statement, I have received messages almost daily from businesses across my constituency that are seriously concerned about their future. This is existential.
Just this week, a small salon owner who has been in business for over 27 years got in touch with me and said that this is the most challenging period that she has ever experienced. The Government’s changes to employer national insurance contributions and the national minimum wage will see labour costs for an average small salon in my Gosport constituency rise by over £25,000. That is completely unsustainable; as my hon. Friend the Member for Hornchurch and Upminster said, it forces people into the black economy or out of business altogether.
Only recently, the Secretary of State for Work and Pensions set out her Government’s welfare reforms, arguing that they are aimed at incentivising people currently in receipt of benefits back into work and secure employment. But I would love to hear from the Minister how he thinks that tallies with the closure of small businesses in our communities, and the redundancies that will result. On top of that, the Government’s actions are set to make 1,000 apprenticeships across the country unaffordable, closing the door to young talent and diminishing training and employment opportunities. I heard from one local barber who has trained apprentices for years; he has now said that the Government’s changes mean he will not be able to afford to train another apprentice.
Businesses will suffer. Female-led businesses in particular will suffer, as well as female work opportunities. Communities will suffer, and in the end the Government will see declining tax receipts. Will the Minister admit that his party made a mistake, and set out how he will communicate with the Treasury to attempt a U-turn? I do not think that anyone on the Opposition Benches would blame him if his party took that sensible step. On Monday I will be hosting a roundtable for all the hair and beauty salons across my constituency, and I would love to know what the Minister’s message is to them.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairship, Ms McVey. I commend the hon. Member for Hornchurch and Upminster (Julia Lopez) for securing this debate. If you looked at me, Ms McVey, you would say that a beauty person could be working all day on that guy without making much difference. There is nothing on the top of my head, so when it comes to going to the barber’s it does not take me too long. I say that in jest: I am speaking in this debate on behalf of the constituents who have contacted me.
As the hon. Member for Hornchurch and Upminster and others mentioned, we are inundated by messages from local businesses and the consumers that they provide services to. According to the National Hair and Beauty Federation, there were more than 61,000 hair and beauty businesses operating in the United Kingdom in 2023. The hair and beauty industry is largely represented by small businesses. Those small businesses have mostly female owners, operators and workers, but not all. Three quarters of businesses employ fewer than five people, while 95% employ fewer than 10. Of people working in the beauty and hairdressing industry, 60.5% are self-employed—it is a specific group of people. There is also a downward trend: the industry has declined by 7%. Apprentices have also declined, as the hon. Member for Hornchurch and Upminster referred to, and some businesses are not taking apprentices on. Those are the issues.
The personal care and beauty industry as a whole grew its contribution to the UK economy by 11% in 2023, so there has been an upward trend in the businesses and what they do. Beauty and hairdressing is worth £5.8 billion, and it makes up a considerable chunk of the sector’s overall contribution to the economy. People tell me that it should be noticed that, for the large majority of hair and beauty businesses, turnover is less than £100,000. In its September 2024 industry survey, the NHBF found that 46% of salons and barbers surveyed made a profit, 41% made none—they broke even—and the rest just weren’t doing.
Those are not healthy statistics. The hon. Member for Hornchurch and Upminster was absolutely spot on when she outlined that business owners are facing a perfect storm of rising costs, including the withdrawal of business rates relief, the increase to employer national insurance contributions and higher minimum wages. Although people are happy to spend their hard-earned money on self-care, the industry struggles with profitability and needs more support. I look forward to what the Minister will say, because it is important we get this right.
The rise in the national minimum wage, the rise in national insurance contributions and increases in the goods supply price are leaving the industry with profit margins of a mere 2% to 3%. That is unsustainable. We need to correct it and offer support to small businesses and microbusinesses. I look to the Minister to see how we can help keep our beauty and hair businesses thriving, keep people in employment and keep people feeling good about themselves. That can be done only with greater support than is available right now. My wife says that when she goes to the hairdressers, she comes out and feels like a million dollars. I would say that she always looks like a million dollars, but that is just me.
Sarah Bool (South Northamptonshire) (Con)
I thank my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) for securing this most important debate. When thinking about the debate, I looked up some quotes on hair. My favourite was, “Invest in your hair: it is the crown you never take off.” That is a very true sentiment, although I apologise to the men among us who are perhaps lacking in the hirsute department. Naming no names—they are kings in their own right.
Hair is such an integral part of our being and our confidence, and we can appreciate how traumatic it is when people lose their hair while undergoing cancer treatment or suffering from alopecia. We often expect to walk on to our high streets and find a hair and beauty salon that can help to tame our locks or restore our nails, but we cannot take the sector for granted. According to the British Beauty Council and Oxford Economics, the sector contributed £8.541 billion to the UK economy in 2023, supporting the direct employment of more than 224,000 people.
I have many excellent hair and beauty salons in South Northamptonshire, but it really pained me when Defern Beauty in Brackley and The Beauty Works in Towcester met me and explained how desperate the position is for the industry. It was heartbreaking to see them explain how their life-long work is being eroded by this Chancellor. After NICs increases and business rate relief changes, they desperately need help.
One of their asks is for a review of the VAT position, which would help not only to save businesses and raise revenues for the Exchequer, but also to save apprenticeships. The British Hair Consortium’s February 2025 report explains that as VAT is applied evenly across goods and services, it has a disproportionate burden on labour-intensive industries such as hairdressing and beauty, where 60% of the costs are wages. When they are unable to reclaim the VAT on their primary cost, which is people, there is a distorted market with competition between VAT-registered and non-registered businesses, which incentivises VAT avoidance tactics such as bunching, disaggregation and disguised employment. We should not be surprised by the rise in cash-only salons, and should think carefully about what that means in practice. The consortium is also calling for a mandatory register of all hairdressing professionals. Without a register, VAT avoidance and disguised employment will continue unchecked, costing the Treasury billions while putting responsible businesses at a disadvantage.
My businesses pride themselves on taking apprentices and bringing the next generation along, but my fear is that, as the British Hair Consortium believes, apprenticeship starts are set to reach zero by 2027, which contravenes the Government’s objective of reducing inactivity among 18 to 21-year-olds. These businesses simply cannot afford to take on the next generation, which will stifle the industry in the long term. I implore the Government to engage with the industry and take immediate action. Hair is a beautiful form of self-expression. Where will we be left without it?
Saqib Bhatti (Meriden and Solihull East) (Con)
It is a pleasure to serve under your chairmanship, Ms McVey. I thank my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) not just for securing the debate, but for making eloquent arguments about the hair and beauty industry and the broader impact of the Chancellor’s damaging Budget last year, such as the impact on nurseries and its knock-on effects. Almost a quarter of a million people are employed in the industry, and it is a disproportionate employer of women and young people. In the short time I have in which to speak, I will limit my comments, because a lot has already been said by my hon. Friend and other hon. Members.
I had the pleasure of visiting the award-winning Aesthetics Hair and Sarah Bowron in Solihull and she eloquently put a lot of the arguments to me. This industry—these businesses—might have never contacted their MP before, because they have never felt the need to do so. Like many small businesses, they just get on with the job in front of them. I am sure that the Minister recognises this, but I am not sure that his colleagues in the Treasury do, so the very first message I would share with him is that small businesses are not there to be squeezed till the pips squeak. There is real concern that the rise in NICs, the reduction in the tax threshold, the impact on part-time workers, the reduction in rates relief and the impending Employment Rights Bill, as well as, of course, the highly competitive market in which the industry operates, will have huge impacts. We have already heard about the impact on the hiring of apprentices.
When there are disincentives on business, such as higher taxation, a much more competitive business environment or higher regulation, it is inevitable that businesses will have to look at where they can cut costs. Young people who come into apprentice positions, who have less training and are yet to learn the skills of the trade, so to speak, are the easiest ones to cut, because the businesses have to be able to continue to operate. I make no comments about his hairstyle or anything like that, but I am sure that the Minister will acknowledge that they are skilled people who do skilled work, and an apprentice cannot just be trained overnight. It takes time to do so.
Hearing from my constituent was certainly eye-opening and helped me to understand the impacts on their businesses. The fundamental point is that businesses in that competitive environment are being forced into a situation where hairdressers go for self-employment status, which means that they are below the VAT threshold, with less return for the Exchequer. That cannot be what the Chancellor of the Exchequer intended when she made her statement.
I have some thoughts about what the Chancellor was trying to do—basically, taxing everyone to appease some of the trade unions—but we will not get into all that right now. The reality, however, is that small businesses are the ones suffering. The impact has been huge. I also share the concern about the impact on high streets and the extended impact on tax avoidance and tax evasion, which of course we are very worried about.
Sarah Gibson (Chippenham) (LD)
It is a pleasure to serve under your chairmanship, Ms McVey.
I thank the hon. Member for Hornchurch and Upminster (Julia Lopez) for securing the debate. She made an important point about the fact that small businesses in the hair sector have endured a perfect storm: the pandemic, soaring energy bills, red tape and unfair tax bills. Everyone present today has called for the Government to recognise this industry’s importance to our economy, our high streets and the communities that we represent. With that in mind, I will pick up on three points made by my colleagues today about employer national insurance contributions, forced self-employment and apprenticeships.
The hon. Members for Strangford (Jim Shannon) and for South Northamptonshire (Sarah Bool) pointed out that the hike in NICs has meant that many small businesses in the industry are just breaking even, never mind making a profit. That is why the Liberal Democrats oppose the Government’s increase to national insurance. We believe it to be an unfair tax on jobs. The Government will reiterate that the employment allowance helped the smallest businesses, but the British Hair Consortium estimates that the changes could add more than £40,000 to the payroll costs of a typical business of this type.
This week, a salon in Royal Wootton Bassett in my constituency told me of a trend across the sector of encouragement to become self-employed, as has been mentioned by many colleagues today—“rent a chair”, my constituent called it. That did not come as any surprise to me, nor will it to other Members. The increasing costs associated with employing staff, coupled with the complex and fairly impenetrable Employment Rights Bill coming down the line, mean that many small businesses such as salons are struggling to plan ahead. These are small businesses whose owners run them in the evenings, not during the day, when they are trying to run the salon. They need clarity from the Government about that Bill and what it will mean for them, and they need support to retain some of their staff. If they do not get that support the industry will see a huge increase in the number of people becoming “chair renters”. I hope that the Minister will address some of the issues of clarity in that Bill.
In addition to the challenge of retaining staff, small businesses find it almost impossible to afford to host apprentices in the current climate—that point was raised by the hon. Member for Hornchurch and Upminster. Hair salons and the beauty sector have long provided a route into meaningful careers for young people, particularly those from disadvantaged backgrounds, but the current apprenticeship levy is not working for them. The Liberal Democrats would like a more flexible skills and training levy that helps businesses invest in their teams.
On Friday I will support a careers fair in Wiltshire that will connect students with lots of small local businesses. I hope that the Minister’s response will enable me to reassure those budding apprentices about their futures. I congratulate the hon. Member for Hornchurch and Upminster for securing this important debate.
Dame Harriett Baldwin (West Worcestershire) (Con)
It is a pleasure to serve under your chairmanship, Ms McVey. I add my congratulations to my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) for securing this important debate, and for clearly setting out the issues with Government policy for the hair and beauty sector.
It is truly SOS time—save our salons. In the debate, we have heard from across the country—from Ribble Valley, Bromsgrove, Stourbridge, Gosport, Strangford, South Northamptonshire, Solihull and Chippenham—about how important these businesses are to our constituents. They make not only a huge economic contribution but an enormous contribution to our personal wellbeing, to fostering community spirit and to tackling loneliness. We have heard about the economic contribution of over £8 billion, but the impact of salons in giving people an opportunity for a moment of peace in a frantic life should not be underestimated.
It is regretful that the Government’s recent decisions have put such uncertainty into the sector. We all acknowledge that the sector has had a long-standing issue that VAT cannot be reclaimed on its biggest expense: labour. We have also heard that, given about 60% of the sector’s costs are wages, the Government’s decisions in the Hallowe’en Budget, particularly the change in the national insurance threshold, have made things considerably worse for businesses in the sector. Many of the businesses are small or medium-sized, and they add so much to our high streets. They are being gravely affected by the Budget.
The British Beauty Council states that the assumption that these businesses
“can simply absorb the costs is hugely misguided. Instead, it will most likely prevent wage increases and deter people from hiring more staff therefore stifling growth”,
which is the very growth that the Government wish to see. Additional pressure has come from the rise in the national minimum wage, and another impact of the Hallowe’en Budget was that, as we have heard, the Chancellor reduced retail, hospitality and leisure relief from a 75% discount to a 40% discount. That has been another major hammer blow to the sector’s financial wellbeing.
We know that the Budget has had a big impact on the hair and beauty sector because the National Hair & Beauty Federation has just published a report examining it. It says that businesses in the sector are expected to incur an additional £139 million in costs, and that is before making any operational adjustments. Labour expenses alone will rise by £100 million. The report revealed that, as a result, 72% of businesses anticipate having to raise prices; no wonder the IMF is calling out the inflationary impact of this Budget. Furthermore, 45% of the businesses intend to cut their staff hours and another 45% plan to reduce their workforce. On average, each business expects to lay off 2.7 full-time equivalent employees and an apprentice. Overall, the sector’s profits are expected to decrease by 15%, with turnover down by £20 million and corporation tax therefore decreasing from £240 million to £200 million. Indeed, the sector’s total tax contribution is anticipated to fall by £44 million, which is a great example of the Laffer curve in reverse.
Following the Budget, the Hair and Barber Council polled hair professionals across the country. Of the 2,000 respondents, 42% are now considering closing their businesses in the next 12 months, 80% said they are now being forced to consider moving to self-employment, 94% said they are either extremely concerned for the future, or believe that a generation of apprenticeships will be lost, and 98% do not believe that the sector is valued by this Government.
Can the Minister confirm whether the Government commissioned any kind of impact assessment of the potential impact of the changes to national insurance in the Halloween Budget on the number of apprenticeships offered by high street businesses? We already know that the Employment Rights Bill will add a further £5 billion of costs across the whole of UK businesses, so what assessment has he made of the potential impact of the 2024 Halloween Budget on the level of employment of women in the hairdressing and beauty industries?
Another long-standing concern that we heard raised in the debate was about tax avoidance and criminal activity, particularly by illegal barber shops linked to money laundering. I tabled a written question to the Home Office on this subject and received the following response:
“According to a report by the Local Data Company and Green Street, the average number of barber shops per 10,000 people has more than doubled in the last 10 years, from 1.4 per 10,000 people in 2013 to 3.1 per 10,000 in 2023.”
What assessment has the Minister made of criminal activity among barber shops and what steps are the Government taking to tackle it?
We have heard today how important the hair and beauty sector is to our high streets and to everyone in our constituencies who uses it. The Government’s Halloween Budget has delivered a devastating blow to the sector and put its future in jeopardy. Will the Minister commit to reversing these damaging tax increases?
The Parliamentary Under-Secretary of State for Business and Trade (Gareth Thomas)
In the usual way, let me begin by congratulating the hon. Member for Hornchurch and Upminster (Julia Lopez) on securing this debate. Let me say at the outset that, as in all the debates that I am privileged to participate in, her and in the main Chamber, there are points in this debate for many other Government Departments as well as my own to consider. I am happy to make sure that those Departments have heard the different insights—let me put it in those diplomatic terms—offered by Members in this debate.
As well as hearing from the hon. Member for Hornchurch and Upminster, we heard from the right hon. Member for New Forest East (Sir Julian Lewis), my hon. Friends the Members for Ribble Valley (Maya Ellis) and for Stourbridge (Cat Eccles), the hon. Members for Bromsgrove (Bradley Thomas), for Gosport (Dame Caroline Dinenage), for Strangford (Jim Shannon), for South Northamptonshire (Sarah Bool) and for Solihull East (Saqib Bhatti), and the hon. Member for Chippenham (Sarah Gibson)—the spokesperson for the Liberal Democrats—and the hon. Member for West Worcestershire (Dame Harriett Baldwin).
Let me begin by responding to a couple of the points that came out in the speech by the hon. Member for Hornchurch and Upminster. I also take this opportunity to commend her and other hon. Members for the support they have shown for hair and beauty businesses across the UK, including in their constituencies.
While I was researching in preparation for this debate, I noticed that the hon. Lady ran a campaign to highlight the very best salons in her area so that they could be nominated for the British Hairdressing Awards. I do not know whether Wyndham Hair was one of those that she nominated, but I certainly wish it well in the coming months.
It is very important that we continue to champion this sector as individual constituency MPs, because of the significance that hair and beauty businesses have to our economy, our high streets and all our daily lives. Many Members have asked about the extent to which the Government engage with the hair and beauty sector, and I can confirm that I regularly meet the sector to understand its views and concerns. The very first business that I visited on my appointment was the excellent Pall Mall Barbers, founded by the remarkable Richard Marshall; he could not read or write when he started in the industry, and he now runs some eight stores in central London and New York.
As well as visits, those conversations with the sector include holding roundtables with key representatives of the industry, the next of which is due next month. I think those are important because the hair and beauty sector is one of the industries that I would gently suggest has been neglected for too long over the last decade. Economically, the industry contributes some £25 billion to the UK economy and employs over 550,000 people. Hair and beauty businesses, as Members have rightly set out, are found on every high street and in every town and village in the UK. They are essential for pulling people to the high street and help to generate the footfall that keeps other local businesses there.
However, it is true that the contribution of the industry is far more than an economic one, and the hon. Member for Hornchurch and Upminster also rightly drew that out in her contribution. It is an industry that should be championed for its female entrepreneurship, for the opportunity it brings to people from all backgrounds, and for its role, on occasion, in combating mental health challenges. For example, over 80% of hair and beauty workers are women, and almost of 90% of businesses in the sector are owned by women. Almost half of all jobs in the sector are in areas with traditionally high levels of unemployment, which I think underlines the contribution that the sector makes in getting people into work and into an exciting and creative career path.
Whether it is getting a fresh haircut, a massage or even just chatting to their beauty therapist, many people relish the conversations that their local salons offer. I am not sure there is much that a beauty therapist in Harrow West could do for me, but I certainly value the conversations and skill of the barbers at Paul’s in north Harrow in my constituency.
In short, hair and beauty businesses are a vital pillar of our high streets and communities. I recognise that it has been an exceptionally challenging decade for high street businesses, and that includes the hair and beauty sector. The pandemic, followed by the cost of living crisis and rising interest rates, forced many hair and beauty businesses into high levels of debt, depleted cash reserves and reduced profit margins.
Opposition Members may not like to hear this, but the Government inherited a very challenging fiscal position, so we had to make some very difficult decisions on tax, spending and welfare at the autumn Budget. Some of the measures in the Budget have concerned the industry, but I believe that those decisions are important for delivering long-term stability and, in time, and even more significantly, economic growth. Many hair and beauty businesses will benefit from some of the other measures that the Chancellor announced.
Dame Caroline Dinenage
It is entirely predictable that the Minister is trying to push the blame on to the previous Government for some of his Government’s decisions. Does he not agree that actually this is such a retrograde step? As a number of Members have tried to explain, what he is seeing from these small businesses is a decrease in the tax take and a decrease in employment opportunities. At a time when his Government have bet the house on growth, all he is seeing is a decline in growth. Surely that is a decision, not a position that he has been forced into, and it is a retrograde step.
Gareth Thomas
I would have thought that the hon. Lady would welcome the measures we took in the Budget to protect the smallest businesses. We increased the employment allowance so that almost 1 million employers pay no national insurance contributions at all. More than half of employers will see no change or gain from that package, and that includes many hair and beauty businesses, as the vast majority of them are micro-sized.
Sarah Gibson
Does the Minister not agree that, at the same time, he reduced the threshold at which that measure steps in, such that any allowances mean that it is counterproductive to most small businesses? There is an increase in NICs once they pay it, and the fact that they pay it on a £5,000 rather than £10,000 employment means that lots of part-time workers are suddenly liable for employment contributions when they were not before.
Gareth Thomas
I will go back to the point I made earlier. We inherited a very difficult fiscal position, which, to be fair to them, the Liberal Democrats do accept. Unfortunately, the Liberal Democrats never like taking difficult decisions in my experience, although they are happy to support the benefits of those difficult decisions.
We sought to protect small businesses as much as we could in the Budget, in order to repair the finances of the country going forward. We are also creating a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. We have committed to reforming business rates from 2026-27 with a permanently lower multiplier for retail, leisure and hospitality businesses, which will include hair and beauty salons.
I also understand that the sector is competing against unfair and illegitimate businesses, as many hon. Members drew attention to. His Majesty’s Revenue and Customs recognises that tax can be very complex, and we are working with the sector to help businesses to remain within the rules. However, there are those who are engaged in criminal activity, and we take that very seriously. As has been well chronicled across various media outlets, the National Crime Agency has been co-ordinating Operation Machinize, during which 265 premises were visited and officers secured freezing orders over bank accounts totalling more than £1 million. Other work in that space is ongoing. We will continue to support law enforcement partners to tackle high street crime more generally. Improved funding to help those partners go after gangs was also announced in the Budget.
Later this year, we will be publishing our small business strategy, which will set out the Government’s vision for small businesses. It will focus on boosting a range of support to businesses to create thriving high streets, make it easier to access finance, open up overseas and domestic markets, build business capabilities, and provide a strong business environment. All those are vital to the growth and resilience of the hair and beauty industry, and I will certainly continue to work with the sector as the strategy develops.
My hon. Friend the Member for Ribble Valley specifically asked me about the consultation run by the previous Government, and whether the Government are going to respond to it. We are due to respond as soon as possible. The Department of Health is leading on that issue, so I hope she will continue to watch this area and campaign on it going forward.
In conclusion, I know that the hair and beauty industry is incredibly important to every high street and every community in the UK, and I will continue to champion it in the House and across Government.
Julia Lopez
I thank every colleague who has spoken so passionately on behalf of their local businesses and the local people who run them. I hope I have done justice to the local business in my patch for the challenges it is facing. I appreciate all those who supported me in preparing for this debate.
I thank the hon. Member for Stourbridge (Cat Eccles). She was courageous in admitting that national insurance has become a problem for some of her local businesses. My hon. Friend the Member for South Northamptonshire (Sarah Bool) raised the importance of hair to the sense of self. I neglected to mention a very important business in my Hornchurch constituency: Bear with the Hair, which helps women who are going through hair loss in relation to cancer treatment. These are the kinds of businesses that are being affected by these challenges.
My hon. Friend the Member for Bromsgrove (Bradley Thomas) and the hon. Member for Ribble Valley (Maya Ellis) raised the important issue of rogue operators. My real fear is that if we drive some of the legitimate operators out of business in the salons that are regulated, we will simply see more of this kind of activity proliferate. My hon. Friend the Member for Meriden and Solihull East (Saqib Bhatti) is always a strong voice on small businesses, and I appreciated his support today.
I wish my hon. Friend the Member for Gosport (Dame Caroline Dinenage) luck with her hair and beauty roundtable. She made the point very well that these taxes are fundamentally counterproductive. My right hon. Friend the Member for New Forest East (Sir Julian Lewis) is always very sound on security and economic issues. He raised the important issue of some businesses being fronts for international crime gangs, a concern that I share deeply. Finally, I would like to say that the hon. Member for Strangford (Jim Shannon) is beautiful inside and out—and I finish by saying that this measure is against Labour’s fundamental aims.