SalonEVO Magazine

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Wednesday, March 3, 2021

Industry Crisis Predicted Without Government Support

The findings of a recent report by The National Hair & Beauty Federation (NHBF) shows that salon and barbershop revenue fell by 45% in 2020, compared to 2019.

The report, titled, Hair, beauty and the pandemic: An industry at the sharp end. The impact of coronavirus on business vulnerability and the potential for mitigating measures, found that the hair and barbering industry are some of the most affected sectors since the pandemic restrictions hit.

Commissioned from independent analysts Pragmatix Advisory by the NHBF, the report details the current situation for the industry, the strength of the sector prior to the pandemic and the urgent measures required to ensure that the majority of the industry survives, which long term, will cost the Government very little.

The highlight findings of the report were that salon capacity is down to 70% of what it was pre-pandemic, losing an average of two hours of appointment time per stylist per day. With reduced customer demand.

Full time employment figures have dropped by 21% on 2019, with the average cash loss to business for 2020 being £17,000, with those over the tax threshold taking an even bigger hit.

With no support from Government, the prediction is that many businesses in the sector are acutely vulnerable to failure in the next 12 months, as 2021 is predicted to be as tough as last year.

A worrying figure was revealed where 60% of businesses entered 2021 with no cash reserves, and one in 10 businesses did not return any income or dividend to their owners or managers in 2020. At this rate, without further support, most expect to survive two to three months (from January), if lockdown continues.

The report revealed that the crisis has had a disproportionate impact on women and those in deprived communities – hair and beauty business owners are 82% female with an 88% female workforce.

There is a higher proportion of Personal Care businesses than any other sector in the most deprived areas of the UK. The closure of these businesses poses greatest risk to those in the local community who are most likely to be employed in these salons and barbershops.

How the Government can help

By reducing VAT to 5% would add £16,000 to the average VAT registered business, closing the cash gap by one-third. This would reduce to 6% the proportion of businesses not returning anything to their owners or managers.

If 18% of the businesses which would have otherwise failed survive as a result of reducing VAT to 5%, then the policy pays for itself through the taxes they will pay.

Richard Lambert, NHBF chief executive says: “Whilst the future could be bleak for the personal care sector, intervention now and immediately following re-opening will have a life-changing positive effect. There’s nothing coming in, but the overheads still have to be paid. When we are closed, we are closed.  We can’t diversify into takeaways and online sales. 

“The Personal Care sector is calling for a specific grant to support businesses through the immediate cashflow crisis, in line with similar funds that have been afforded to many other sectors, including the arts, hospitality and leisure, and the aeronautical industry, among others.”

He continues: “We also need support after re-opening to keep cash in these businesses so they can recover. The bigger businesses have been hit the hardest and are now the most vulnerable to failure. A targeted VAT cut to 5% would allow them to re-build, invest in staff and apprentices, and once again be the heart of their high streets and communities.  We’ve shown this move will pay for itself, so it’s a cost-effective solution for the Government.

“Right now, it feels like we are last in line for support, flippantly disregarded within Parliament and overlooked by Government, despite the billions of pounds we contribute to the economy each year.”

The NHBF, working together with the British Beauty Council (BBC), British Association of Beauty Therapists and Cosmetologists (BABTAC) and UK Spa Association, has been lobbying the Department for Business (BEIS), the Treasury and the Cabinet Office for an urgent Personal Care crisis fund and a reduction in VAT.