DWE0032

Written evidence submitted by The National Hair & Beauty Federation (NHBF)

Background

The National Hair & Beauty Federation (NHBF) has around 6,000 Members and is the UK’s largest trade body for the hair, beauty and barbering industries. The NHBF focuses on helping members to run successful and profitable hair and beauty businesses by providing advice, specialist support and tailored services to meet the unique challenges of running a salon or barbershop.

Current business context and impact of Covid

The hair, beauty and barbering sector is made up of around 46,000 businesses, mostly small and micro businesses operating in communities across the UK. The sector makes a significant contribution to the UK economy, with £5.5 billion spent on services in 2019-20[1] and consumer spend across the whole sector totalling £27.2 billion[2] in 2018. Salon businesses are led predominantly by female entrepreneurs, and provide valuable careers to 257,000 people, more than half aged 18-35, across the UK.

State of the Industry quarterly survey for September (note: these results will be published shortly)

Rising energy and business costs and declining consumer confidence has meant that a sense of uncertainty has replaced the signs of recovery that we saw in July:

• Making a profit/loss: While the proportion of businesses making a loss has not increased, fewer businesses are making a profit (35%).
• Rising prices: The general trend towards increasing prices continues. 65% will do so over the next three months.
• Reliance on external support has increased again, with 74% of businesses either partially or completely reliant on Government support (up from 50% in July).
• Energy costs: 77% are paying more for energy than they were six months ago. For half of businesses, energy costs have increased by 40% or more.
• Debt levels are rising again, with 54% of businesses in debt; 42% of those in debt report that debt has increased. 58% believe it will take them more than two years to clear.
• Recruitment intentions have dipped slightly. In the next three months, only 12% of respondents are definitely or likely to take on new staff; only 9% were definitely or likely to take on apprentices.
• Business confidence in the sector has decreased; 46% are not sure whether they will survive over the next six months.
• Growth intentions have dipped, with only 29% saying that they intend to grow their business either rapidly or moderately (compared with 39% in July).

Executive summary and key recommendations

Thank you for the opportunity to put forward our views. We will focus on those issues raised by the Committee inquiry that are most relevant to us and targeted at the Department for Education (DfE) and Department for Work and Pensions (DWP).

• There is a skills crisis in the hair & beauty sector due to a multiplicity of interlinked factors, which include the challenging economic climate, changes in employment status, the impacts of the pandemic and of Brexit

• With further support, the hair and beauty sector could play a key role in economic recovery and levelling up, particularly considering that research shows that the higher and areas is on the scale of deprivation, the greater the concentration of hair & beauty businesses[3].

• Further incentives, including wages top up for learners aged 19 and over, should be offered to employers to take on learners for any ‘job ready’ qualification[4]. Given that many apprentices only start making money for the business after two years, offering apprenticeships in the current climate is simply unaffordable for many small and micro businesses.

• There are opportunities to retrain older individuals and bring them into the sector, but further incentives are needed to close the gap between the minimum wage and apprentice wage funding for the 19+ age range.

• The funding band that the DfE allocates to the current Hair Apprenticeship Standards is inadequate and should be increased. Otherwise, if training providers cannot cover their costs, fewer providers may offer the standard in the future putting future sector skills and talent development at risk.

• The Government is putting significant resources into T-levels at the moment which launch in the sector in September 2023, rather than into apprenticeships. We acknowledge that the Government’s aim is for the skills system to be employer led, so it should recognise that sector employers prefer the apprenticeship route as there is more on-the-job learning and apprentices arrive ‘job ready’. The majority of businesses in the sector fall below the Apprenticeship Levy threshold, and so do not pay and do not have access to Levy funds.

• The DfE could play a more enhanced role of promoting education and training opportunities options within the sector to 16-18-year olds, reflecting a modern, diverse and continually evolving sector, facilitating central and local government collaboration and bringing together young people and employers at a local level.

1. Scale of the skills challenge - skills crisis in the hair & beauty sector

There is currently a skills crisis in the hair & beauty sector. The NHBF report Careers at the cutting edge: tackling skills shortages in the hair and beauty sector[5], set out a number of interlinked factors across education and qualifications, recruitment and retention and financial pressures that are combining to form a skills crisis in the sector (figure 1).

Figure 1

The report outlines that just as there is no one single cause, there is no one single solution either and sets out a series of possible interventions targeted at government, education providers, industry and salons themselves (figure 2). Only by making multiple interventions will we start to solve the skills crisis; a piecemeal response will not secure a vibrant sector and meaningful careers in the future.

Figure 2

In more detail:

• Apprenticeship starts are decreasing due to the sector shift towards self-employment, lower levels of funding and young people staying on in education.
• Financial pressures also have an impact on businesses’ ability to take on apprentices, with the VAT threshold, minimum wage rises, reductions in income and Covid debts squeezing already tight margins.
• Skills challenges are even more pronounced in the hair & beauty sector than in other areas of the economy and COVID has had a negative impact on the ability of businesses to recruit more experienced staff as many have left the sector.

Our core recommendations for Government coming out of the report are:

• Find ways to provide incentives or fund the gap between the apprentice wage and minimum wage for apprentices aged 19+, which is currently difficult for businesses to afford.
• Introduce a financial incentive for employers to take on learners for any ‘job ready’ qualification. We suggest this should be set up to £3,000.
• Urge the Low Pay Commission to be restrained when advising the Government on rises to the National Minimum Wage (NMW) and National Living Wage (NLW) in 2023/24, given the escalating costs around doing business.
• Encourage government to lead a crack-down on tax evading businesses that are driving down prices and undermining legitimate businesses under pressure.

Areas where the NHBF and the sector are taking action include:

• Professionalisation: leading a sector-wide discussion with industry bodies on options for self-regulation and driving up standards across the different parts of the sector.
• Raising standards: Working with sector stakeholders to recognise, value, adopt and standardise qualifications and standards; giving advice and promoting these standards across the sector.
• Developing a tailored NHBF business continuous professional development and learning offer for salons and practitioners.
• Promoting hair & beauty as a valued career of choice: supporting and promoting a range of solutions for engagement with schools in conjunction with existing campaigns of industry partners, eg the recently launched Not Just a Hairdresser[6] campaign, Channel 4’s The Big Blow Out[7] programme.
• Improving college courses: Facilitating the development of stronger links between training providers, colleges and salons/barbers through developing a range of solutions for engagement, such as developing salon resources/guides or FAQs.

Recruitment challenges and unfilled vacancies

Around 57% of hair and beauty businesses reported that they had unfilled vacancies in March 2022 and half of hair salons said it took them more than 16 weeks on average to fill a vacancy. The main issues that businesses faced were candidates lacking the required skills or suitable experience, but also insufficient funds to pay salaries and lack of government financial support.

Declining apprenticeship starts

As self-employment has grown in the sector, the number of employers available to take on apprentices has fallen. Lower levels of funding have led to a dramatic decline in training provider delivering the standard. The requirement for 16- and 17-year olds to stay on in education has also meant fewer potential apprentices come forward.

Hair & beauty apprenticeship starts have fallen across the UK over the past five years. There were 7,000 starts on apprenticeships in England in 2020-21,[8] down from over 17,000 in 2016-17.

The NHBF report referred to previously estimates that, if current trends continue, and without necessary interventions, there could be fewer than 3,400 hair & beauty apprenticeship starts in the UK by 2025. Apprenticeship starts have been falling across all industries; however, apprenticeship starts in hair and beauty in England are decreasing at a faster rate than apprenticeships overall.

2. Impact of Brexit on the hair and beauty sector

The NHBF report[9] outlines in more detail the impact of Brexit on recruitment, particularly of experienced staff in England. The impact in London and the South East of England was more than the rest of England, reflecting higher populations of European migrants in these areas prior to the referendum. England, Wales and Northern Ireland were more impacted than Scotland.

Within the hair and beauty sector, barbershops have been the worst affected, with half of survey respondents[10] finding Brexit has hindered their ability to find experienced staff.

3. Hair and beauty experiencing skills shortages even more so than other sectors

The NHBF report demonstrates that the recruitment challenges and unfilled vacancies in the hair & beauty sector are currently even more pronounced than in other areas of the economy.

Structural changes - shift to self-employment

A cross-sector report from 2021[11] outlined the continuing shift towards self-employment in the sector, driven primarily by practitioners seeking greater autonomy. The main findings from the report included:

• Covid caused a shift in previous working practices, with 20% of the sector changing to their current way of working since the pandemic began.
• ‘Home salons’ were now the most common place of work (40% of respondents) for self-employed practitioners in the personal care sector.

This shift presents problems for the sector because of the fact that it is salons, rather than self-employed individuals, that take on apprentices and develop them.

Local Data Company statistics indicated that over 7,300 business (16% of the industry) had been lost to the pandemic between 2020-21. The latest NHBF Industry Statistics Report for 2021 shows that the number of salon owners and managers fell by 7,800 (27.5%) between July 2020 and June 2021, with a significantly greater fall in female owners/managers. The total workforce declined by about 7,000 (2.5%) in 2020 and then a further 18,500 (6.5%) in 2021. This demonstrates both the shift to self-employment and staff leaving the sector for other roles in retail, hospitality and other areas of the economy.

4. The role of Government and DfE in particular in supporting and promoting the sector; its understanding of workplace skills and how well it is doing.

Supporting the sector

Lack of financial support by Government was cited most often as a threat to apprenticeships - by more than 50% of businesses in the research which underpins the NHBF report.

Securing a future supply of apprenticeships is crucial to the health and vibrancy of the sector in the future. The main reason why businesses employ apprentices, cited by 72% of businesses, is because it is important for business growth and sustainability.

Enhanced funding for hair apprenticeship standard

The sector has a proud tradition of providing apprenticeships. Hairdressing is one of the most popular apprenticeship standards in terms of sheer numbers, ranking in twelfth place in the top 100 apprenticeships[12].

As requested by the Government in 2014-16, the sector developed a new and more demanding apprenticeship standard. The sector strongly supported these changes, which raised the bar in terms of quality and standards. The standard was backed by a representative funding band of £9,000. However, in 2018, the funding band was reduced to £7,000. This proved devastating for the hair and barbering industries, as it was not sufficient to support apprentices working towards the higher and more robust standard. The NHBF expressed its concerns at the time through submissions and correspondence[13].

Impact of reduced funding

Training providers have managed to stay afloat in recent years by effectively cross subsidising the apprentices on the lower funding band from the money received from those who were still operating on the higher funding band. However, as these apprentices are now completing their apprenticeships, the higher funding levels are no longer available, and training providers are coming under financial pressure.

We are aware through feedback from the Association of Employment and Learning Providers (AELP) hair and beauty forum that training providers are highly concerned that they will simply not be in a position to continue providing the standard on the lower funding rate.

The hair professional apprenticeship standard has recently been reviewed[14] again, and the new standard, which represents a further raising of the bar regarding equality, diversity and inclusion from the 2016 standard, was submitted to the Institute for Apprenticeships and Technical Education (IfATE) in May 2022. However, it is becoming increasingly clear that, with the additional content, if the relevant funding band is not adequate for the new apprenticeship standard, training providers will not be able to deliver it, compounding issues around the recruitment of future talent to the sector.

The NHBF believes that the funding band allocated should reflect the content of the revised standard, and should therefore increase to the original funding band (£9,000), bringing it in line with the funding bands for other similar occupational competence standards.

More effective DfE support to promote the sector

The DfE could play a greater role in promoting education and training opportunities options in the sector to 16-18 years old, reflecting a modern, diverse and continually evolving sector, and facilitating central and local government collaboration and bringing together young people and employers at a local level.

We want DfE to encourage schools to take a broader view of the sector when they are explaining it to young people. There are wider opportunities available beyond salons or barbershops, in theatre, film and session work with international travel, as well as in product design and manufacturing (using STEM knowledge), retail, sales and marketing. The sector also offers a route into entrepreneurship and the skills and knowledge to be developed around owning, running and growing your own business.

Promotion of T levels and entry level skills

The Government is focused on the introduction and delivery of T-levels at the moment, which will be introduced in the hair and beauty sector in 2023.

T levels will become one of three major options for learners to study at Level 3, alongside apprenticeships and A levels. Taking into account the threats to the future of the sector, it is vital that we have a pipeline of talent, built on robust training and education to meet the needs of salons and barbershop businesses in the future. Employers in hairdressing or barbering will always prefer apprenticeships to T levels, as candidates gain more workplace experience and are more job ready. However, this route gives businesses another option, given the current difficulties with recruiting school leavers.

Employers will be able to use the work placements as part of T levels as an opportunity to identify young people they would want to take on and train further. Given that beauty therapy courses are well-established in colleges, and the level 3 beauty qualification is the competency level for insurance, entering the industry via the beauty therapy T level route will be popular.

Employers in the industry will want T level learners to pass the same independent end-point assessment as apprentices, because this is the only way to ensure that learners have the necessary ‘work-ready’ skills. There needs to be clear communication between careers advice services and the sector before the launch of the T-Levels to curb any misunderstanding relating to the technical pathway option the T-Level provides within the sector.

October 2022

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