NHBF submission to the House of Commons Business and Trade Select Committee Inquiry on Small Business Strategy

Dear Liam Byrne MP,

We offer our thanks to you and the Business and Trade Committee of the House of Commons for opening this inquiry[1] examining the future small business strategy of the UK Government. We submit written evidence for your consideration on behalf of the National Hair & Beauty Federation (NHBF) and its approximately 5000 Members.

We are submitting this written evidence document to the Inquiry to advise it on the challenges the high street face. In addition to this we are also providing the Committee with the following publications:

In its consultation the Government set out five core policy pillars of the strategy with the first being its aim to create safe, thriving high streets for small businesses in their communities.

The sector makes a significant contribution to the high street and community wellbeing with a continuing rise in the number of barbers, beauty salons, nail bars and aesthetic clinics yet a decline in the number of hairdressers and hair and beauty salons on the high street.

The 2024 Autumn Budget was a major intervention which shaped the future of the sector. It led to the businesses having to make the difficult decision to put up prices, reduce staff & apprentice hours, reduce employee numbers and reduce investment in the business. Whilst others are shifting their business models to a self-employed or hybrid model.

The June 2025 Spending Review was disappointing with few of the challenges for our sector as we remain the forgotten sector of the UK economy.

In spite of hair & beauty’s role as a cornerstone of the high street, with over 49,000 businesses and employment of more than 250,000 people, it currently falls outside the Government's industrial strategy and are overlooked in priority sector discussions.

As the Committee considers its recommendations to the Government on the strategy, we urge you to not forget the hair & beauty sector and reflect its importance in your submission to the government.

We may currently fall outside industrial strategies and priority lists, but we're integral to the fabric of British communities and the wellbeing of millions of consumers. Without businesses run by our Members, the future of the UK high street is a bleak one.

Yours sincerely, 

A signature on a white background Description automatically generated, Picture 

Caroline Larissey 

Chief Executive, National Hair & Beauty Federation (NHBF) 

 


Contents

 

NHBF submission to the House of Commons Business and Trade Select Committee Inquiry on Small Business Strategy

Executive Summary

Response to Inquiry Questions

What key issues should be addressed through the small business strategy?

Representation and Consultation

How can policymakers ensure that the voice of small businesses’ is heard in government?

Starting a business

How straightforward is it to start a business, and what difficulties do entrepreneurs face when starting up?

Do small businesses currently face any challenges in competing with larger firms? What can be done to “level the playing field”?

Supporting growth

How accessible are public procurement processes for SMEs, and what are the consequences of the Procurement Act 2023 for small businesses?

What is your assessment of the export support available to small businesses?

What are the current challenges to the long-term sustainability of the high street, including ownership of the high street, and what are the consequences of these trends for SMEs?

Costs

What are the key cost pressures, such as energy prices, facing SMEs, and how should these be addressed?

What is your assessment of the current overall tax regime, including reporting requirements, for SMEs, and how could it be improved?

Business support

Does the Government’s current business support offer meet the needs of SMEs, and how could the offer be improved?

Do family-run businesses face any specific challenges, including ‘red tape’, and what support do they require to meet these challenges?

Improving productivity

What has been the experience of small businesses in accessing banking services, and how does the Post Office Banking Framework support their needs? To what extent does this framework also provide adequate access to financial guidance and advice?

How effectively are productivity-enhancing practices, such as new technologies, being shared and adopted among SMEs? Is the Innovate UK Catapult Network meeting the needs of small businesses?

How should work across multiple government departments, mayoral combined authorities, and local authorities be coordinated to support the growth of SMEs?

What metrics should the small business strategy use to measure its success, and how should delivery against these objectives be monitored?

Appendix

Document List

NHBF England Flex Apprenticeship Proposal – Letter to Minister

NHBF England Flex Apprenticeship Proposal

NHBF Hair and Beauty Business Growth Program: Enhanced Help to Grow

National Hair & Beauty Federation (NHBF) Business Rates Reform paper 2025 and recommendations for government


Executive Summary

The National Hair & Beauty Federation (NHBF) welcomes the opportunity to contribute to the Business and Trade Committee’s inquiry into the UK’s Small Business Strategy.

We are proud to work closely with Parliament and Government to ensure our sector is recognised as not only a major contributor to the UK economy, but also as a critical piece of community infrastructure by both Government and Parliament.

An Economic and Social Powerhouse

The hair & beauty sector contributes £5.8 billion in value to the economy and supports over 220,000 jobs across approximately 49,000 businesses nationwide. It is a highly inclusive industry, with 86% of the workforce identifying as female, offering accessible pathways into employment, self-employment, and entrepreneurship for people from all backgrounds.

The number of businesses in the sector continues to grow, particularly microbusinesses and sole traders, meanwhile the workforce overall is shrinking.

In 2023–24 alone, we saw a loss of 16,500 jobs, following a 7% reduction the previous year. NHBF research shows that employers are being pushed toward non-employment models in response to increased cost pressures, including the Autumn 2024 Budget changes to National Minimum Wage rates, Apprenticeship Wage rates, and Employer National Insurance Contributions.

These measures are expected to cost the sector an additional £239 million, or £25,000 per year for each small business, costs that are largely unavoidable for high-street employers who already operate on tight margins.

Without intervention, this trend undermines the viability of employment-based models for the sector and limits opportunities for young people and apprentices to build sustainable careers within the salon space.

Providing Social and Community Value

As was mentioned in the NHBF’s verbal evidence, the hair & beauty sector provides a unique social value. Salons and barbershops support mental health and wellbeing and offer safe, inclusive spaces in every community. The NHBF supports greater use of social prescribing and encourages formal recognition of these businesses as partners in community health strategies.

Call for Targeted, Tangible Reform

The Government’s forthcoming Small Business Strategy presents a vital opportunity to realign policy with the lived realities of small business owners. For the hair and beauty industry, the strategy must address:

 

 

If the Government is to succeed in delivering its Plan for Change and wider economic mission, small businesses must flourish.

The hair and beauty sector is ready to play its part but only if the strategy delivers meaningful reform that protects employment, enables investment, and strengthens the local economic and social infrastructure our members provide.


Response to Inquiry Questions

What key issues should be addressed through the small business strategy?

To support small businesses effectively, the strategy must address five key areas:

Tax Reform through VAT Modernisation

The NHBF have been campaigning for a VAT reform for over 15 years[2], as the current VAT system acts as a disincentive for growth, creating a “cliff edge” where small businesses approaching the £90,000 turnover threshold face a sudden and significant increase in costs. This structure penalises employment-based models and discourages businesses from expanding or formalising their operations.

NHBF state of the industry surveys have shown that businesses are choosing to remain just below the threshold or shift to self-employed rental models to avoid VAT obligations. This reduces tax revenue for the Government and weakens employment protections.

As an organisation, NHBF recognises that HM Treasury is unlikely to be able to deliver a reduction in VAT in light of the spending commitments which were made in the June 2025 Spending Review.[3]

The strategy must prioritise VAT reform. The two options for this include an option to introduce a smoothing mechanism or tapered threshold to remove the binary impact of VAT registration, encouraging growth and transparency and the implementation of a sector-specific exemption or relief, similar to approaches used in many European countries that apply reduced VAT rates to personal services.

Many in the sector would seek the latter option but the NHBF recognises that HM Treasury is resistant to introducing sector specific solutions or taxation during this Parliament. To examine the viability of the former the NHBF, in partnership with Pragmatix Advisory, published a report detailing on how a smoothing mechanism could be implemented.[4] This has been added to the appendix of this submission. 

The report proposes several models for a VAT threshold smoothing mechanism which are designed to reduce the disincentive to grow while still protecting public revenues. [5]

One set of options involves introducing a graduated VAT rate starting at the current threshold. While this approach could reduce VAT revenue by up to £2.5 billion in the short term, it’s expected to improve compliance and transparency, potentially recovering around £2 billion.

Alternatively, a second approach models graduated rates starting below the current threshold, gradually stepping up to the standard 20% rate. This method would maintain VAT revenue while removing the cliff-edge disincentive.

The potential upside is significant. The report estimates that a smoothing mechanism could encourage £25.2 billion in additional declared turnover leading to £2.2 billion in additional VAT revenue for HM Treasury. The hair & beauty sector alone could contribute an additional £33 million, all while enabling more businesses to grow, employ staff, and invest in their futures.[6]

The cost of implementation for businesses is manageable: an estimated £1,000 per year in admin costs just 2.5% of average sector labour costs. Importantly, this is a small price to pay compared to the opportunities a reformed system could unlock.[7]

Feedback from the sector indicates strong interest in reform, with many supporting a graduated VAT approach. Others call for the threshold to be raised or the standard VAT rate lowered for personal service sectors, as has been done in countries like Finland and the Netherlands, both being examples of where VAT cuts have driven job growth and sector resilience.

Support for Employment and Apprenticeships

Hair and beauty businesses are significant providers of apprenticeships, offering structured training and hands-on experience which lead to lifelong careers.

Yet, in response to cost increases, over half of businesses in the sector now plan to reduce or eliminate their apprentice intake. This puts the future skills pipeline at risk, fuelling a skills crisis which may only get worse.

The small business strategy must:

Business Rates Reform

Business rates are a regressive and outdated cost burden that hits small, labour-intensive, high-street businesses the hardest. The freezing of the small business multiplier, combined with a reduced relief for retail, hospitality and leisure businesses, is compounding the pressure on an already stretched sector.

To level the playing field, we propose that the Committee should recommend to the Government:

NHBF has submitted its full recommendations for reform to the ‘Local authority funding reform – Resetting the business rates retention system’ Government Consultation and have included the submission as an appendix in this submission.[8]

Access to Finance and Banking Services

Cash flow pressures, exacerbated by recent policy changes, make access to responsive, tailored banking support more critical than ever. Yet many microbusinesses report difficulty accessing affordable credit, sector-relevant advice, and services that reflect seasonal fluctuations and client-based revenue models. The Committee should consider:


Representation and Consultation

One of the most persistent barriers for small businesses is the lack of meaningful involvement in policymaking. Microbusinesses do not have the time or resources to engage with complex consultations or lobbying efforts.

As a result, policies are often designed without a true understanding of their disproportionate impact on the smallest firms. The strategy must embed:

How can policymakers ensure that the voice of small businesses’ is heard in government?

To ensure small businesses are genuinely heard in government, policymakers must prioritise structured, ongoing engagement with those most directly affected by policy decisions.

Especially micro and small enterprises that lack the time, resources, and lobbying power to navigate the policy process themselves. This is particularly critical for high street sectors like hair and beauty, where businesses are deeply embedded in local communities but often overlooked in national policy discourse.

Despite being 86% female-led and representing nearly 50,000 businesses[9], our sector remains under-recognised in policymaking.

As the NHBF’s Straightening out the Costs report shows, broad-brush policies particularly those on taxation, wages, and employment, can have disproportionate effects on labour-intensive, community-based businesses like ours. One-size-fits-all approaches risk undermining viable businesses that contribute both economically and socially.

To address this, government must establish formal consultation mechanisms that go beyond token input and reflect the lived realities of small business owners.

This includes dedicated small business advisory panels, sector-specific engagement forums, and requirements for impact assessments to explicitly consider microbusinesses. Most importantly, policymakers should treat sectors like ours not just as economic contributors, but as essential local infrastructure providing jobs, training, and wellbeing in every community.

Starting a business

How straightforward is it to start a business, and what difficulties do entrepreneurs face when starting up?

While starting a business in the UK is administratively straightforward, new entrepreneurs face significant financial and structural barriers from the outset.

Recent policy changes have introduced immediate cost pressures, averaging around £25,000 for a small business, which can deter early-stage growth and place unsustainable strain on new ventures.

One of the most significant deterrents is the design of the VAT system. The current threshold creates a "cliff edge" that penalises growth, making it financially safer for many to remain self-employed rather than establish employment-based businesses.

This discourages the creation of jobs, apprenticeships, and clear career pathways that are vital to the long-term success and social impact of new enterprises.

For many entrepreneurs, especially in sectors like hair and beauty, the choice isn’t whether to start a business, but whether they can afford to build one that offers stable employment and professional development.

A more supportive tax environment, particularly VAT reform such as that which the NHBF has proposed, as well as targeted start-up incentives would ease these pressures and encourage more entrepreneurs to build sustainable, job-creating businesses.

 

Do small businesses currently face any challenges in competing with larger firms? What can be done to “level the playing field”?

Small businesses in the hair & beauty sector are facing growing and, in many cases, overwhelming challenges in competing with or the ability to grow into larger firms. Rising employment costs, rigid tax structures, and inflexible regulatory frameworks are placing immense pressure on small employers, pushing many to consider downsizing, shifting to self-employed models, or exiting the industry altogether.

The impact of recent policy changes, particularly those introduced in the Autumn 2024 Budget, has been severe. According to the NHBF’s January 2025 State of the Industry survey, which has been included in the appendix, more than three-quarters of businesses (77%) said they would need to increase prices to cope with new costs.

Nearly half (47%) reported plans to reduce the of staff employed or cut working hours.

Alarmingly, 20% of businesses also indicated that they would move from employing staff to contracting self-employed workers, and a further 18% planned to adopt a hybrid employment model. In total, 19%, over 9,000 businesses, are considering abandoning the traditional employment structure altogether.

This shift is not without consequence. The move away from employment-based business models threatens to erode structured career pathways that have long number been a hallmark of the sector, supporting more than 220,000 jobs and offering routes into skilled employment, particularly for women and people from seldom heard communities.

It also risks reducing public revenue, with projected tax losses of up to £40 million due to lower income tax, National Insurance, and VAT contributions.

Unlike larger firms that have the financial and administrative capacity to absorb cost increases and access bespoke legal or tax advice, small businesses operate with much narrower margins.

They are less able to respond to inflationary pressures, tax compliance demands, or regulatory changes, making them increasingly vulnerable in the current economic environment.

To level the playing field, structural reform is urgently needed, starting with the VAT system. The current flat-rate structure and high threshold create a cliff-edge effect that discourages growth and incentivises businesses to remain small or informal.

The NHBF survey highlights VAT as the number one issue constraining growth in the sector. Many salons limit their turnover to remain below the threshold or shift to self-employment to avoid the additional costs and compliance burden.

Reform must include the introduction of a smoothing mechanism or tiered VAT rates for labour-intensive services like hair and beauty. This would remove the disincentive to grow, improve tax compliance, and help responsible, employment-based businesses remain viable.

Business rates reform is another essential lever. A staggering 83% of businesses surveyed said they would benefit from raising the Small Business Rates Relief (SBRR) threshold from £12,000 to £25,000. Many multi-site operators often running small, community-based salons are excluded from relief altogether, despite operating in ways comparable to single-site businesses. Extending SBRR to these businesses would reduce fixed overheads and encourage growth and stability at the local level.

Finally, fair enforcement and compliance support must be part of the solution. Small business owners report being undercut by informal operators who avoid VAT, skirt employment law, and operate largely unchecked.

While the overwhelming majority employers strive to comply with tax and labour regulations, they often lack the resources to compete on such unequal terms or simply don’t have the knowledge to comply with the system. The government must ensure that enforcement targets hidden non-compliance without punishing responsible businesses that are already struggling to survive.

Ultimately, small businesses in the hair and beauty sector are not asking for special treatment, they are asking for fairness.

The system as it stands penalises growth, discourages employment, and rewards informality. With the right reforms, VAT smoothing, apprenticeship incentives, expanded business rates relief, and stronger enforcement of fair competition, the government can give these businesses a fighting chance to grow, invest, and continue providing jobs, services, and wellbeing to communities across the UK.

 

Supporting growth

How accessible are public procurement processes for SMEs, and what are the consequences of the Procurement Act 2023 for small businesses?

NHBF will not be offering a response to this question as we don’t believe that public procurement is a significant item for the hair & beauty sector. We would however encourage both local and national Government’s to put in place systems which allow SMEs to fairly compete for contracts.

What is your assessment of the export support available to small businesses?

British hairdressing enjoys a strong global reputation, with UK stylists widely recognised for their creativity and trend leadership. However, despite this international appeal, domestic cost pressures are forcing many businesses to prioritise day-to-day survival over taking advantage of growth opportunities.

Current export support initiatives are not fully accessible or relevant to small, service-based enterprises, especially those in the hair and beauty sector.

For export support to be effective, it must be paired with domestic stability measures, such as VAT reform and relief from rising employment costs, to create the headroom businesses need to invest in international opportunities.

Without this foundation, the sector’s export potential risks being underutilised despite its world-class credentials.

What are the current challenges to the long-term sustainability of the high street, including ownership of the high street, and what are the consequences of these trends for SMEs?

The NHBF believes the long-term sustainability of the high street is under serious threat due to rising operating costs, high vacancy rates, limited access to affordable premises, and a lack of targeted support for community-focused SMEs. These challenges are particularly acute in the personal care sector, which is both a major employer and a key contributor to the social and economic life of high streets across the UK.

Our sector consistently features in the top ten retail categories for high street growth, with barbershops, beauty salons, and nail bars anchoring footfall and creating vibrant community spaces. Yet, the loss of 16,500 jobs in 2023/24 puts this vital social infrastructure at risk.

Businesses in our sector are already being forced to make difficult choices: NHBF research shows that employers have cut, on average, 2.7 full-time equivalent staff and one apprentice per business in response to rising costs.[10] This not only threatens job creation and skills development, but also severely limits capacity to engage with complex processes which are shutting many small businesses out of local economic opportunities.

Despite these pressures, our sector holds untapped potential in health and social care partnerships particularly through social prescribing. Hair and beauty professionals often act as informal frontline wellbeing advocates, offering human connection, caring touch, and routine social interaction that has been shown to reduce loneliness, anxiety, and depression. This makes them ideally placed to support local health strategies, especially in underserved communities. However, this potential is largely overlooked in current high street planning and service commissioning.

Government needs to recognise and integrate the role of the personal care sector in public health and wellbeing frameworks through social prescribing models.

 

 


Costs

What are the key cost pressures, such as energy prices, facing SMEs, and how should these be addressed?

Small and medium-sized enterprises (SMEs), particularly in the hair and beauty sector, are facing significant cost pressures, with energy prices emerging as one of the most critical concerns. Nearly two-thirds (64%) of hair and beauty salons and barbershops report that energy is their first or second largest expense, reflecting the sector’s high dependence on energy to deliver essential services.

Despite signs of improved energy contract offers, businesses continue to experience elevated costs.

As of July 2023, 58% of businesses were paying more for energy than three months earlier, while 22% saw no change, often due to being locked into fixed-rate contracts. The sector remains heavily affected by what many describe as a "cost of doing business crisis", where energy bills are compounded by rising supply prices and increased staffing costs particularly following the April 2023 increases to the National Minimum and National Living Wage (NMW/NLW).

Key cost pressures reported by businesses include:

To support businesses navigating these challenges, the NHBF is playing a proactive role. Its efforts include:

However, as a representative body there’s only so much which we can do to support our sector, it needs the support of the government to address the mounting cost pressures facing SMEs.

This could include targeted government support, clear guidance on cost-saving opportunities for SMEs and sustained sector-specific engagement via organisations like the NHBF.

What is your assessment of the current overall tax regime, including reporting requirements, for SMEs, and how could it be improved?

The NHBF’s assessment is that the current tax regime is increasingly unfit for purpose for micro and small businesses, particularly those operating on the high street.

It is overly complex, imposes disproportionate administrative and financial burdens, and lacks the flexibility needed to support sustainable employment-based business models.

Self-employment models offer many opportunities for health and beauty professionals but without reform of the tax regime, it will soon be the only route open for people to work in the sector.

Key concerns with the System:

 

 


Business support

Does the Government’s current business support offer meet the needs of SMEs, and how could the offer be improved?

Business rates are a major cost for sector businesses; it is in the top four business costs along with staffing, premises and energy. This is a cost which can be quickly and efficiently addressed by the Government.

 

The NHBF welcomes the aim of achieving a fairer system of business rates, which has been proposed by the Government in its recent calls for contributions to its consultation on ‘Resetting the business rates retention system: technical consultation’.[11]

 

We submitted recommendations on how the Government could reform the system to better serve a flourishing high street. The headline points can be found below with a copy of the submission included in the appendix.

 

Submission to Government

 

A summary of the points we have put to the Government on business rates:

 

Businesses have benefitted from business rates relief and the retail discount in England and Wales. These reliefs have been an important intervention for the sector and we have no doubt that this has kept 1000s of sector businesses afloat in recent years.

 

NHBF welcome the government’s commitment to permanently lower tax rates on properties up to £500k from 2026/27 when the retail relief ends. We also welcome efforts to permanently level the playing field by putting a higher rate on the most valuable properties including those owned by the large online giants and distribution warehouses.

 

We have also welcomed the extension of retail relief, albeit at a lower rate at 40% (cash cap of £110,000 per business) in 2025/26. We estimate that around 2000 sector businesses have benefited from the retail relief.

 

In order to incentivise sector growth, we call for the government

 

NHBF welcome flexibility around small business rates relief being offered to small salons with multiple businesses in the local area. We think that this could help around 2000 businesses and importantly salon owners and employers struggling under the weight of rising staff and apprentice costs post Autumn Budget.

We also welcome consideration of improvement relief beyond 12 months to support businesses investing particularly through energy efficiency and energy saving measures.

 

Finally, NHBF supports any steps taken to simplify the business rates process for micro businesses in particular as far as possible in order to minimise administrative burdens.

 

Do family-run businesses face any specific challenges, including ‘red tape’, and what support do they require to meet these challenges?

Multi-generational salons, predominantly female-led, face succession planning difficulties compounded by increased employment costs.

These businesses often serve as pillars of community identity, with trusted relationships spanning decades. Flexible apprenticeship pathways and simplified business transfer processes become critical as businesses restructure to manage cost pressures while maintaining their community anchor role. 

 


Improving productivity

What has been the experience of small businesses in accessing banking services, and how does the Post Office Banking Framework support their needs? To what extent does this framework also provide adequate access to financial guidance and advice?

The cash flow pressures introduced by recent Budget measures have heightened the importance of strong, responsive banking relationships for small businesses. For many beauty businesses, which operate on tight margins and experience pronounced seasonal fluctuations, access to flexible and timely financial services is essential.

However, feedback from the sector suggests that traditional banking services often lack an understanding of these cyclical income patterns and the distinct role such businesses play as local, community-based service providers by offering wellbeing, employment, and social value far beyond their core commercial output.

While the Post Office Banking Framework has improved basic transactional access in areas underserved by high street banks, it does not yet go far enough in meeting the broader financial needs of small businesses.

Access to tailored financial guidance, short-term credit solutions, and advisory support through this framework remains limited. SMEs require more than cash-handling infrastructure; they need sector-sensitive financial advice and products that reflect their business models, including delayed income cycles and high upfront staffing costs.

Strengthening the framework’s advisory function and integrating it more closely with local business support ecosystems would significantly improve its value to small enterprises navigating economic uncertainty.

Consumer Protection Framework for Micro Businesses

While consumers benefit from comprehensive rights protection when facing rent increases, contract lock-ins, and hidden contractual terms, along with access to various support organisations, small and micro businesses, such as salon, barbershop and clinics operating on the High Street face similar exploitative practices with no equivalent safeguards.

Small enterprises are frequently subjected to unfair rent escalations, restrictive lease agreements, and obscure contractual obligations that create significant financial burdens and operational constraints. The government should consider extending existing consumer protection frameworks to encompass micro businesses, providing them with similar rights and access to support mechanisms.

This would create a more equitable business environment where small enterprises have recourse against predatory practices, helping to sustain High Street businesses that are vital to local economies. Such protection could include rent review tribunals, clearer contractual disclosure requirements, and dedicated support services specifically designed for small/micro business needs, thereby strengthening the foundation of small business growth and sustainability across the UK.

 

How effectively are productivity-enhancing practices, such as new technologies, being shared and adopted among SMEs? Is the Innovate UK Catapult Network meeting the needs of small businesses?

Adoption of productivity-enhancing technologies among SMEs in the hair & beauty sector remains limited, as immediate cost pressures force many businesses to defer investment in innovation.

While some digital tools offer operational benefits, uptake is uneven and often hampered by resource constraints and a lack of tailored support. Moreover, the nature of our work which is delivering in-person, therapeutic services that cannot be replicated digitally. This means that technology must augment, not replace, the human connection at the core of our value proposition.

The Innovate UK Catapult Network has yet to demonstrate widespread accessibility or relevance to the smallest businesses in service-based sectors like ours. To be effective, future innovation support must be better tailored to micro and small enterprises, with practical, sector-specific pathways for adopting technology that enhances, rather than displaces, our core strengths.

 

How should work across multiple government departments, mayoral combined authorities, and local authorities be coordinated to support the growth of SMEs?

Supporting the growth of small and micro businesses particularly in labour-intensive, community-based sectors like hair and beauty requires a coordinated, cross-government approach that dismantles current policy silos and recognises the full economic and social contribution of SMEs.

Evidence from both the NHBF’s Straightening out the Costs report and the January 2025 State of the Industry Survey shows that fragmented policymaking is creating unintended and, in some cases, counterproductive consequences for small businesses.

For example, while the Department for Education promotes apprenticeship uptake, Treasury-led wage and tax policies are driving employers to reduce apprentice numbers, with 59% of hair and beauty businesses now planning to take on fewer apprentices due to rising costs.

At the same time, while the Department of Health and Social Care encourages community wellbeing initiatives, small salons delivering informal mental health support face rising employment taxes and unaffordable business rates. This disconnect in how the Government directs policy must be resolved.

The solution lies in a centrally coordinated but locally delivered model. This being a system that allows for national coherence in policy design but also reflects the realities local businesses face on the ground alongside the addressing of sector specific needs.

Establish a Cross-Government SME Taskforce

A permanent, cross-departmental body should be established, led by the Department for Business and Trade (DBT), and include HM Treasury, the Department for Education (DfE), the Department for Work and Pensions (DWP), regional combined authorities, local authorities, and sector representatives such as the NHBF.

This taskforce would:

Develop a Unified SME Support Framework

This framework should integrate all national and local SME support policies under a shared outcomes-based model, ensuring coherence across:

The NHBF’s modelling shows that without intervention, policies such as those that were implemented in the Autumn 2024 Budget will have cost the hair and beauty sector an estimated £239 million, with small businesses seeing average cost increases of £25,000 per year.

These pressures have already resulted in 47% of businesses reducing staff hours, and 20% switching from employing staff to contracting self-employed workers, decisions that ultimately reduce tax revenue for the Government and workforce stability.

Localise Delivery Through Mayoral Combined Authorities and Councils

While national strategy is essential, implementation must be flexible and locally led. Mayoral Combined Authorities, Local Enterprise Partnerships (LEPs), and local councils should be empowered to adapt support such as rate relief schemes, business mentoring, and grant programmes to local economic needs.

For example, the NHBF survey found that 83% of businesses would benefit from raising the Small Business Rates Relief threshold to £25,000 a move that could be implemented locally with central backing to protect businesses from inflationary revaluations and regional cost disparities.

Embed Sector Representation and Metrics in Policymaking

Sector voices, especially those from underrepresented industries like hair & beauty must be involved at every stage of policymaking. Despite employing over 220,000 people and generating £5.8 billion in value, the sector is consistently under-recognised in consultations.

Formal engagement mechanisms with trade bodies and the use of consistent metrics such as apprentice uptake, job creation, and business model sustainability must be embedded into monitoring and evaluation processes across departments.

In short, government coordination to support SME growth must move beyond existing departmental silos and be grounded in shared data, unified goals, and a realistic understanding of how national policies impact businesses on the ground.

The evidence from the NHBF shows that current approaches are not only inefficient but are actively deterring employment, skills development, and growth. A new model of governance which is responsive, inclusive, and locally enabled is now essential to secure the future of the UK's SMEs.

What metrics should the small business strategy use to measure its success, and how should delivery against these objectives be monitored?

A successful Small Business Strategy must be grounded in evidence, not only to track its impact but also to ensure it remains responsive to real-world conditions.

This is especially critical in sectors like hair and beauty, which are highly sensitive to changes in employment costs, tax policy, and local economic conditions.

Drawing on the robust data in the NHBF’s State of the Industry Survey (January 2025) and Straightening out the Costs report, the Government should adopt a multi-dimensional framework of economic, fiscal, social, and behavioural metrics, underpinned by regular monitoring and cross-departmental collaboration.

Employment and Workforce Health

Workforce trends are among the clearest indicators of small business health. In the hair and beauty sector alone, staffing levels dropped by 16,500 in 2023–24, following a 7% decline the year before. The January 2025 survey revealed that:

Recommended metrics:

Monitoring approach:

These figures should be collected through regular, sector-led surveys (e.g., quarterly updates from federations like NHBF), HMRC payroll data, and apprenticeship scheme uptake statistics.

Business Performance and Profitability

Small business resilience is directly linked to profitability and ability to absorb cost shocks. The Autumn Budget 2024 introduced wage and tax measures that increased the average cost burden for hair and beauty businesses by £25,000 annually. As of January 2025:

Recommended metrics:

Monitoring approach
Ongoing economic surveys, VAT return data, and ONS business insights should be integrated with sector-specific forecasting and behavioural modelling (as used in Straightening out the Costs).

Fiscal Contribution and Compliance

The Government must understand the broader fiscal consequences of its policy decisions. Modelling from the NHBF report estimates:

Recommended metrics:

Monitoring approach:
Data should be sourced from HMRC and modelled against counterfactual scenarios using sector-specific forecasts (as in Pragmatix Advisory’s modelling).

Sector Viability and Structural Trends

A core aim of any SME strategy should be to ensure long-term sector viability. In the NHBF January 2025 survey, 26% of businesses planned to downsize or exit the industry altogether, a 6% increase in just four months.

Recommended metrics:

Monitoring approach:

Use local authority licensing data, Companies House registrations, and quarterly sector-specific business surveys to identify trends and warning signs early.

Equity, Inclusion and Community Impact

The hair and beauty sector is 86% female-led and one of the UK’s most accessible career pathways for young people and underrepresented groups. However, this social value is often overlooked in policymaking.

Recommended metrics:

Monitoring approach:

Government should incorporate metrics from ONS labour force data, apprenticeships databases, and qualitative surveys focused on SME contribution to social infrastructure.

Real-Time Behavioural and Economic Indicators

The NHBF’s quarterly State of the Industry survey provides an effective model for real-time behavioural and economic data collection. For example, it was through these surveys that the sector identified rapid behavioural changes such as pricing increases, workforce reductions, and structural shifts to self-employment in response to recent policy changes.

A robust monitoring framework for the Small Business Strategy must go beyond headline economic growth and instead capture the full picture of SME performance, resilience, and social value. Using mixed data sources, from tax returns to frontline surveys and drawing on insights from sector-specific reports like Straightening out the Costs, policymakers can craft a strategy that is both effective and adaptive.

Only by understanding what success looks like on the ground, through jobs retained, apprentices hired, and businesses choosing to grow can government ensure its strategy delivers meaningful outcomes for the UK's 5.5 million small businesses

 

Thank you for the opportunity to put forward our views.

Contact: 

Sam Silver, Head of Policy & Public Affairs

National Hair & Beauty Federation (NHBF) sam.silver@nhbf.co.uk


Appendix

Document List

The following documents and research have been used to collate this evidence document, in the list we either provide a direct link to the document or note it as attached.

If the Committee have any questions about the data presented or require any further documentation, the NHBF will be happy to provide this.

 

 


NHBF England Flex Apprenticeship Proposal – Letter to Minister

Gareth Thomas MP

Minister for Services, Small Business and Exports

Department for Business and Trade

Old Admiralty Building

Whitehall

London

SW1A 2DY

 

Via email

 

17 June 2025

 

 

Dear Minister Thomas,

 

Support for the Hair and Beauty Sector and High Street Vitality

 

I am writing to follow up on our recent positive discussion regarding the challenges facing the hair and beauty sector and to formally present, through attachment to this letter, our NHBF Hair and Beauty Business Growth Program for your consideration and support.

 

As we have discussed on a number of occasions, the hair and beauty sector is fundamental to high street vitality and the small business economy. Our industry employs over 220,000 people across the UK, with 78% of businesses operating in areas targeted for economic development under the Levelling Up agenda. These predominantly micro-enterprises and solo practitioners form the backbone of our high streets, driving footfall and supporting local economic ecosystems.

 

Hair and Beauty Business Growth Program

 

The NHBF Hair and Beauty Business Growth Program directly supports your department's high street and small business agenda by providing accessible business support to enterprises that are currently excluded from existing frameworks.

 

It also meets your department’s challenge of engaging groups who have traditionally been excluded from opportunities to succeed and develop. According to government statistics, 87% of the hair and beauty workforce is female, with more than 62.5% working as self-employed, and more than half are between the ages of 16-34. Our sector offers opportunities at a level that few others do.

 

The NHBF enhanced Help to Grow initiative removes the 5+ employee barrier which prevents the vast majority of our sector from accessing vital business development support. This program represents exceptional value for government investment, delivering significant economic returns whilst addressing critical sector skills challenge.

 

We add industry-specific content, personalized mentoring, and ongoing business support while leveraging the government's existing investment in the Help to Grow infrastructure.

 

The program's comprehensive approach includes:

 

Following productive conversations with your teams and representatives from the Department for Education and Skills England, we have developed an innovative flexi/solo apprenticeship proposal specifically designed for our sector. This initiative would address the critical skills gap we discussed, where fewer than 3,400 hair and beauty apprenticeships are projected by 2025 if current trends continue.

 

The bespoke apprenticeship models recognise the unique operational characteristics of hair and beauty businesses, providing flexible training pathways that accommodate the predominantly small-scale, service-based nature of our enterprises while maintaining rigorous standards and progression opportunities.

 

Why the Hair & Beauty Sector Needs Support

 

The sector faced unprecedented challenges following the 2024 Autumn Budget, with NHBF research showing that businesses were projected to incur additional costs of £139 million following it. Without targeted intervention, we risk significant business closures and job losses, undermining both local economies and the government's high street revitalization objectives.

 

This week’s Comprehensive Spending Review offered limited good news for the sector and we urge your government to not to forget the hair and beauty sector. We may currently fall outside industrial strategies and priority lists, but we're integral to the fabric of British communities and the wellbeing of millions of customers.

 

Our members are already responding to these pressures by reducing staffing levels and cutting apprenticeship opportunities, amplifying the skills crisis and threatening the sector's long-term sustainability. Support for this programme would be a key first step in supporting the high street and investing in its future.

 

Request for Partnership

 

I would be grateful for the opportunity to meet with you to discuss both initiatives in detail. Government support for these programs would demonstrate clear commitment to small business growth, high street vitality, and skills development while delivering measurable economic and social returns.

 

We believe these initiatives align perfectly with your departmental goals and the government’s strategic priorities and offer cost-effective solutions to complex sectoral challenges. The NHBF stands ready to work in partnership with government to deliver transformative support for our industry.

 

I look forward to attending the rearranged Personal Care Sector Roundtable with you and hope that we will be able to discuss how we can work with the Government to strengthen this vital sector and support the thousands of small businesses that depend on it. Perhaps we could arrange a separate conversation to discuss our specific proposal in more detail.

 

Yours sincerely,

 

A signature on a white background Description automatically generated, Picture 

Caroline Larissey 

Chief Executive, National Hair & Beauty Federation (NHBF) 

Caroline.larissey@nhbf.co.uk 

 

 

NHBF England Flex Apprenticeship Proposal

The National Hair and Beauty Federation (NHBF) proposes an innovative England Flex Apprenticeship model featuring two distinct approaches: NHBF as employer for Level 2 apprenticeships, and NHBF as facilitator for solo business (self-employed) Level 3 apprenticeships. This model addresses the unique employment structures within the hair and beauty sector while ensuring compliance, safety, and quality training.

Critical Context: The current flex apprenticeship model, as it stands, would not work for the hair and beauty sector and would need to be adapted. Typically, learners stay with an employer for the duration of the apprenticeship, unlike current flexi apprenticeship programme where it is mainly contract working. This sector requires a more flexible approach due to its unique employment patterns and the prevalence of solo business operations.

Raising Professional Standards Through UK Regulated Qualifications

The hair and beauty sector benefits from a robust framework of UK regulated qualifications from Ofqual-regulated organisations, which already serve as the genuine license to practice without the need for costly additional licensing schemes. These regulated qualifications ensure all practitioners meet established hair and beauty standards, providing consumer protection and professional credibility through rigorous assessment and quality assurance. The apprenticeship scheme leverages this existing regulatory framework, ensuring apprentices achieve nationally recognised standards and qualifications that demonstrate competency and compliance with individual industry standards. By making regulated qualifications the standard pathway into the profession, we eliminate the need for expensive licensing systems while maintaining the highest professional standards. 

This approach recognizes that UK regulated qualifications already provide the quality assurance and professional recognition needed to practice safely and competently in the hair and beauty sector, offering a cost-effective solution that protects consumers while elevating the professional status of qualified practitioners.

Level 2 Model: NHBF as Employer

Overview

NHBF would act as the employer for learners

undertaking Level 2 apprenticeships in hair and beauty, providing a structured entry point into the industry with two distinct pathway options.

Two Level 2 Pathway Options

Option 1: Foundation Apprenticeship + Reduced Timescale Full Apprenticeship

NHBF Hair and Beauty Business Growth Program: Enhanced Help to Grow

Business Impact & Value Proposition

•          Investment: £595 per business (includes 2-year NHBF membership package for business with staff or solo business)

•          Program value: Over £3,000 per business in specialised training, mentorship, resources, HR support, ADR and 24/7 legal support

•          Comprehensive approach: 10-weekstructured program with self-paced online modules, pre-recorded industry webinars, live online workshops with industry experts, and up to 10 hours of personalised business mentoring and two year’s business support, supporting the business to remain safe legal and profitable.

Strategic Benefits to Government & Economy

1.      High Street Revitalisation: Hair and beauty businesses drive footfall, with 67% of consumers visiting other businesses when attending appointments

2.      Local Economic Multiplier: Each £1 invested could generate an estimated £3.70 in local economic activity

3.      Employment Generator: Supporting 220,000+ jobs with potential to create additional positions

4.      Tax Revenue Enhancement: Increasing profitability directly increases tax contributions

5.      Reduced Benefit Dependency: Strengthening businesses prevents unemployment and reduces pressure on government support systems

6.      Skills Gap Solution: Addresses critical business skills shortages identified in the sector's skills crisis report where fewer than 3,400 hair & beauty apprenticeships are projected by 2025 if current trends continue

7.      Levelling Up Agenda: 78% of hair and beauty businesses operate in areas targeted for economic development

8.      Cost-Effective Intervention: Leverages existing government resources with industry-specific enhancements

Why Support This Initiative?

1.      Sector in Crisis: The "Straightening Out the Costs" report projects sector businesses face additional costs of £139 million following the 2024 Autumn Budget, threatening business sustainability

2.      Addressing Skills Gap: 57% of hair & beauty businesses had unfilled vacancies, with more than half taking over 16 weeks to fill. 70% of businesses said it is more difficult to recruit than 12 months ago.

3.      Micro-Business Focus: Tailored for predominantly micro and self-employed (solo) businesses that form the cornerstone of high streets but fall outside current support frameworks requiring 5+ staff

4.      Neurodivergent Owner Support: Specifically designed for neurodivergent business owners with limited time and budget who cannot access the standard Help to Grow program

5.      High Street Preservation: Without targeted support, these essential businesses that anchor high streets will continue to face closure

 

 

Enhancing Help to Grow: Management Essentials

The standard Help to Grow: Management Essentials is an excellent free, online course that explains essential business concepts. However, it has significant accessibility limitations - businesses must employ 5+ staff to access it, excluding many hair and beauty businesses. The NHBF program removes these barriers and enhances the offering by: 

1.      Industry Specialisation: Adding hair and beauty sector-specific content addressing unique operational challenges, with contextualised resources

2.      Personalised Support: Augmenting with up to 10 hours of one-on-one mentoring from sector experts

3.      Implementation Focus: Providing clear action planning methodology using OKRs for practical implementation

4.      Peer Learning: Facilitating connections with other business owners through live workshops for problem-solving

5.      Ongoing Support: Creating a pathway into NHBF's comprehensive Member services for continued development and regulatory compliance 

6.      Neurodiversity Accessibility: Accommodating neurodivergent business owners, who represent a high percentage of entrepreneurs in the sector

7.      Scalable Model: Creating a template that could be rolled out across other sectors with similar demographics

Autumn Budget Impact & Response

•          Rising Labor Costs: Labor costs projected to increase by £100 million (4%) across the sector, with disproportionate impact on larger businesses

•          Employment Consequences: Businesses expect to cut an average of 2.7 full-time equivalent staff and 1 apprentice

•          Reduced Business Rates Relief: Relief reduction from 75% to 40% starting April 2025 creates additional financial pressure

•          Amplifying Skills Crisis: Fewer salons will take on apprentices, particularly concerning in a predominantly female-led sector

Program Capacity & Funding Strategy

1.      Initial Phase Scale: 20 businesses per cohort, 6 cohorts planned for 2025 (120 businesses total)

2.      Public-Private Partnership: Opportunity for matched funding between central government, local authorities, and private sector

3.      Local Funding Utilisation: Program structured to leverage Local Enterprise Partnerships, Combined Authorities, and local government economic development funds

4.      Regional Adaptation: Capability to tailor certain elements to address specific regional economic priorities

5.      Cost-Effective Intervention: Leverages existing government resources with industry-specific enhancements

6.      Member Support Model: Free access for NHBF Members creates sustainable approach to program delivery

NHBF's Unique Position to Deliver

•          Comprehensive Member Support Infrastructure: Existing HR and legal advice services

•          Alternative Dispute Resolution Services (ADR): Established protocols for resolving business challenges

•          Industry-Specific Resources: Preparing for Success Guide and business toolkit already in use

•          Established Mentoring Network: Access to industry experts with business development expertise

•          Nationwide Reach: Ability to support businesses across diverse geographic locations

The NHBF Hair and Beauty Business Growth Program represents a strategic investment in a sector essential to both the economy and community wellbeing. By making the Help to Grow: Management Essentials program accessible and relevant to hair and beauty businesses, it addresses the urgent skills crisis while bolstering high street vitality.

 

 

 

 


National Hair & Beauty Federation (NHBF) Business Rates Reform paper 2025 and recommendations for government

National Hair & Beauty Federation (NHBF) Business Rates Reform paper 2025 and recommendations for government

About us

 

The National Hair & Beauty Federation (NHBF) has circa 5000 Members and is the UK’s largest trade body for the hair and beauty sector. The NHBF focuses on helping members to run successful and profitable businesses by providing advice, specialist support and tailored services to meet the unique challenges of running a salon, barbershop or clinic.

 

Key messages and recommendations

 

 


Background and context

 

Supporting important high street businesses

The hair and beauty sector is a key player on the high street and central to the future of thriving high streets. NHBF members and sector businesses are based in communities across the UK in high streets, parades, town centres, shopping centres, villages and rural areas. They are also disproportionately present in more disadvantaged areas[12].

The sector is made up of around 50,000 businesses, mostly small and micro, led predominantly by female entrepreneurs, operating in communities across the UK. It employs 220,000 workers, largely young people aged under 35, and generated an estimated £5.8 billion of value to the UK economy in 2023-24[13]. In 2023, consumer spending within the sector totalled £27.2 billion[14]. Barbers, beauty and nail bars are still showing the highest growth in the top ten retail categories[15] although hairdressers and hair and beauty salons have been declining in number over the last two years.

Majority benefit from small business rates relief

Valuation Office Agency (VOA) data for hair and beauty sector[16]

 

21,230 sector businesses pay business rates. The remainder (from 50,000 businesses) are likely to be working on a self-employed basis either in salon or other locations.

 

£0-11,999 rateable value: 18,460 hair and beauty businesses in England.

£12-14,999: 1140

£15-50,999: 1560

£51,000+: 110

 

The vast majority of sector businesses (87%) paying business rates benefit from Small Business Rates Relief (SBRR).

 

A rise in Small Business Rates relief from £12,000 to £25,000 would help up to 2000 sector businesses.

 

 

Business rates is a major cost for sector businesses; it is in the top four business costs along with staffing, premises and energy.


Wider value to wellbeing

Hair, beauty and barbering is a people centric sector and the value of the hair, beauty and wider complementary therapies industries in terms of health and wellbeing is wide-ranging. Hair and beauty practitioners offer an informal counselling service when carrying out treatments although some individuals train and achieve more formal counselling qualifications. Practitioners can also be trained to pick up on the warning signs of domestic abuse and sensitively signpost individuals to support. Many businesses also work with hair loss charities and collaborate with local doctors on wellbeing events to tackle stress. The NHBF collaborates with skin cancer charities to share advice and guidance on picking up issues during treatments.

Important employer of young people

The sector has historically been a significant employer of young people including putting them on a pathway to running their own business. Since the Autumn Budget and rises to wage rates, National Insurance Contributions (NICs) and business rates, salon owners and employers in particular are under increasing pressure.

Latest sector insights[17]

The latest quarterly survey in January shows that the sector recovery remains slow and steady with the Autumn Budget measures to have a significant impact. Sector employment was already in decline with half of businesses still paying off Covid debts:

Impact of the Autumn Budget[18]

The ‘Straightening out the costs’ report by Pragmatix Advisory Ltd commissioned by NHBF models that the Autumn Budget (rising wage rates, rising Employer National Insurance Contributions (NICs) and changes to business rates) will cost the sector £139m overall and £100m in labour costs. In summary:

-          Corporation tax revenue estimated to fall by 17% (from £240m to £200m).

-          VAT to fall by 0.5% equivalent to £2.5m across the sector.

-          Overall taxes are expected to decrease by 4% or £44m across the sector (net of employment allowance).

 

Government support in the form of business rates relief has been vital to the sector as is the rise in the Employment Allowance which will benefit micro businesses. However, sector employment has reduced by 7% in 2022-23 and a further 16,500 positions in 2023/24. The sector has 60% labour costs and maintaining the salon employer model in light of rising costs is becoming increasingly unviable.

These impacts make it even more important that the sector can benefit from the positive impacts of business rates reform. Supporting these stalwarts of the high street, employers of young people and those taking on apprentices is important to the future of the industry.

Overall, the sector (before any proposed changes to business rates) pays £6.5 million in business rates. If the proposed changes from the budget were to go through, the sector is estimated to pay £15.7 million. However, if the business rate relief threshold increased to £25,000, the sector is calculated to pay £4.6 million in business rates (£11 million less than £15.7million).

 


HM Treasury transforming business rates paper

 

  1. Protect the high street

 

The NHBF welcomes the aim of achieving a fairer system, that protects the high street and supports investment. We welcome also the HMT codesign and partnership approach including through industry seminars in December 2024. We agree that the system could be more responsive and fit for the 21st century.

 

Business rates reliefs including the Retail relief in recent years has been invaluable for the hair and beauty sector, as has freezing the small business multiplier. We welcome the intention announced at the Autumn Budget 2024 to introduce permanently lower business rates for retail, hospitality and leisure properties from 2026-27 to level the playing field for the high-street. The measures outlined in the box below are very welcome.

 

  • An intention to introduce permanently lower multipliers for retail, hospitality and leisure (RHL) properties with a rateable value (RV) under £500,000 from April 2026-27.
  • An intention to fund this sustainably via a higher multiplier on all properties with RV of £500,000 and above, which includes the majority of large distribution warehouses including those used by online giants.
  • Providing support for retail, hospitality and leisure properties in the interim period leading up to the new permanent multiplier by providing 40% relief to RHL businesses on their business rates in 2025-26, up to a cash cap of £110,000 per business.
  • Protecting the smallest properties by freezing the small business multiplier in 2025-26 and protecting over a million properties from inflationary bill increases.

 

 

 

We welcome the measures in the Non-Domestic Rating (Multipliers and Private Schools) Bill to introduce permanently lower multipliers for retail properties in England. This is a positive and much-needed step that will benefit businesses across the hair and beauty sector.

 

  1. Encourage investment and growth

 

We agree that a fairer system is important to investment. We are pleased that protecting and supporting high streets is a priority as is permanently rebalancing the business rates burden.

 

The majority of sector businesses paying business rates (87%) benefit from Small Business Rates Relief. We cannot emphasize enough the importance of this relief and the option of expanding it to small businesses at a local level with multiple properties, as a way to incentivise growth.

 

We would also welcome the extension of improvement relief from beyond 12 months, as possible. This would ensure that businesses could make investment decisions with confidence including in energy efficiency and energy saving measures. Businesses are still paying high energy bills and account for as the first or second largest cost for two thirds (64%) of sector businesses.

 

 

Views on business rates reform

In September 2024[19], businesses were asked which measures would have a positive impact on their business in terms of business rates reform in England. Businesses were most favourable around raising small business rates relief from £12,000 to at least £25,000 (55%). 47% thought it was important to continue to the Retail discount in England and Wales. 29% said continue to freeze the small business multiplier and 12% said allow the option to claim small business relief if the business has two or more small salons.

 

Voice of business

‘Business rates relief is essential for businesses to continue to remain open’.

 

When asked whether businesses were the owner of multiple businesses/salons/barbershops that miss out on qualifying for Small Business Rates Relief because of restrictions. 8% said yes but that the majority (69%) not.

 

State of the industry survey – January 2025

In January 2025, businesses were asked further questions around business rates reform to feed into the Straightening out the costs report.

 

64% of businesses have a property for which they pay business rates, 36% do not. 79% have a rateable value under £51,000. 58% of businesses benefit from the Retail & hospitality business rates relief.

 

63% of businesses benefit from small business rates relief (SBRR) (single property valued below £12,000 so receive 100% relief). 22% don’t benefit from SBRR and 13% have a single property valued between £12,001 and £15,000 so receive partial relief.

 

When asked why the business does not qualify for SBRR 78% replied that they have a single property that exceeds the £15,000 valuation. 22% said that they have multiple salons where at least one is valued above £2899 and/or together exceed the limit of £20,000 (£28,000 in London) for SBRR.

83% of businesses said that they would benefit if the threshold for small business rates relief was increased from £12,000 to £25,000.

 

Straightening out the costs report

 

The report modelling indicates that raising the qualification threshold for small business rate relief, provided appropriate budget measures are implemented, would lead to a reduction in business rates for the sector, estimated at approximately £11 million. This adjustment could provide much-needed financial relief for smaller enterprises, allowing them to reinvest savings into their businesses, such as improving facilities, hiring staff, or expanding services.

 

A graph of a business rate reduction AI-generated content may be incorrect.

 

Another option would be flexibility for businesses operating multiple salons. The NHBF also suggests implementing a tiered approach to SBRR, where businesses with multiple salons can benefit from adjusted rates relief based on the number of properties they operate. This approach would ensure that businesses with higher operational costs, who will see staff costs rise by the highest percentage, receive adequate support. Providing targeted relief to businesses with multiple locations helps ensure their financial stability amidst rising costs, and by alleviating some of the financial pressures, businesses can maintain their workforce, reducing the likelihood of staff being laid off.

 

Case study: Hair salon, Shrewsbury, Shropshire

‘…impact of the budget on a PAYE small chain of four salons employing 30 people.

Firstly, the impact of the measures for my business will be an increase in employers NI of £14,000, business rates £7,658 and wages at least £36,000. So a total of around £58,000.  This is the actual increase so to absorb that we will need to increase our turnover by that amount which will in itself cost more in wages and therefore create even more VAT and NI. Having four salons I don’t benefit from the small business reduction in rates because everything is added together. I also will only get one allowance on the NI across my four locations.

In my business from April for every full-time person that I employ I will pay £12,500 in tax before and if I make any profit. £3,061 of employers NI and £9,500 of VAT created on that person’s turnover (the amount required to pay them 60% of their turnover equating to the living wage with holiday pay.)

We are competing with other business models that, in a lot of cases, don’t pay any of these upfront turnover taxes, so we are at the limit of what we can increase our prices by to stay competitive. Together with the impending employment law changes it is making having a PAYE hairdressing business in multiple locations unviable.

..I run essentially four small high street type businesses employing people on or just above the living wage but only receive one employers NI allowance of £10,500 (from April). I and many other small businesses with more than one outlet are disproportionally affected by employers NI. We have to have all locations together under the same employers NI number’.

Impact of removing restrictions of small business rates relief for businesses with multiple salons:

Removing this restriction ‘would make a difference to me. My rateable values are £17,500, £15,000, £7,200 and £3,750. Two properties would be taken out of rates which would save around £3,000 in the 2025-26 year’.

 

Tackling avoidance and evasion

 

We recognise that business rates are important to both local authorities and the UK government in terms of revenue for investment. However, we are concerned that small and micro businesses are falling victim to heavy-handed enforcement tactics by local authorities and ask that councils handle these issues more constructively with local businesses. We appreciate that councils have a job to do but they also have a role in supporting local businesses to survive and grow and we need to avoid the destructive impact of heavy-handed council tax debt collection.

 

Enforcement case study - Islington Council 

 

A barber business with multiple barbershops in the London area had a very negative experience recently with Islington Council.

 

A debt collecting letter was sent to one of the business outlets but unfortunately, due to a staff error, was missed by the business owner.

 

It cost the business £350 after they missed the letter from the council and the Direct Debit stopped working at the end of year. The business had to pay a full year of business rates up front and around £700 bailiff fee, which was more than the business owed the Council.

 

No calls or emails were sent as a warning, the bailiffs were sent coming through the door in front of clients and staff, undermining the business and they looked at taking away their barber chairs in an aggressive way. The business had money to pay the bill, it was just a genuine mistake that the bill wasn’t paid and letter from the council missed.

 

 

 

  1. Making the system more responsive

 

Revaluations

The NHBF welcomed the decision made through the Business Rates Review in 2021 to move to a three yearly revaluation period. We believe that more frequent revaluations will better reflect changes in the property market and economy resulting in more fair and accurate rates bills for businesses.

It is important for a sector that is so prevalent on the high street and for which business rates bills are a key business cost, to ensure that rates bills reflect the up-to-date value of properties. However, sector businesses are generally not in favour of more frequent revaluations, and increasing these to annually (see chart 1) which was only chosen by 4%. We are wary of any moves that add to administrative burdens for the smallest of businesses.

We welcome efforts to simplify the business rates system as far as possible to reduce complexity and make it more user friendly for rate payers particularly micro businesses.

As we have set out, sector businesses are still working to pay off Covid debts and their recovery has been slow and steady over the last three years. Therefore, continuing to provide support to businesses, including with business rates, is very important in terms of the future recovery and health of the sector.

Regional differences

Each business is affected differently by the revaluation process; for some in city centres, particularly in London, rates are likely to increase, for others in more rural locations, rates may stay the same or decrease. One issue for businesses in city centres is that because of the shift to online shopping by the consumer and the fact that in some areas footfall has still not returned to pre-pandemic levels, these businesses will find it challenging to pay higher businesses rates.

The NHBF State of the Industry quarterly survey data[20] has shown that businesses in city centres e.g. London and main cities in Scotland struggled more with returning to pre-Covid levels of productivity and recovered more slowly, particularly with fewer people commuting into urban locations for work purposes. Anecdotally, we know that businesses in some suburban areas have benefitted, as people use local services more and commute less. Some high streets are thriving, others less so.

As the vast majority of businesses in the sector are small and micro businesses, we welcome efforts to cushion the blow for these businesses that are less able to support large rises in their business rates bill. We support keeping small businesses within the SBRR or retail relief to counteract rising rateable values due to inflation. When the government sets multiplier rates for 2026-27 in the Autumn Budget 2025, we call for this to be considered.

A system fit for 21st century

 

We support the digitalising business rates (DBR) project which is a good idea to make use of the data, linking business rates property data and HMRC tax data and give central government a better overview, but we appreciate that it will not be available for a few years.

 

Thank you for the opportunity to put forward our views.
 

 

42 | Page

 

[1] https://committees.parliament.uk/work/9193/small-business-strategy/ 

[2] www.nhbf.co.uk/documents/vat-campaigning-timeline/

[3] www.gov.uk/government/publications/spending-review-2025-document

[4] www.nhbf.co.uk/supporting-your-business/vat   

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system

[9] www.nhbf.co.uk/documents/nhbf-manifesto-full-report-2024/

[10] www.nhbf.co.uk/advice-and-resources/industry-reports/straightening-out-the-costs-report-2025/

[11] https://www.gov.uk/government/consultations/local-authority-funding-reform-resetting-the-business-rates-retention-system/local-authority-funding-reform-resetting-the-business-rates-retention-system-technical-consultation

[12] Impact of the pandemic on the hair and beauty sector, Pragmatix Advisory report for NHBF (2021)

[13] NHBF Industry Statistics (2024)

[14] British Beauty Council ‘Value of Beauty’ Report, Oxford Economics (August 2024)

[15] Local Data Company (a Green Street company) (2024)

[16] https://www.gov.uk/government/statistics/non-domestic-rating-stock-of-properties-2024

https://assets.publishing.service.gov.uk/media/6662e0a8a8f98e4a64ca94d9/ndr_stock_scat_la_2024.zip

 

[17] nhbf-state-of-the-industry-summary-jan-2025-final.pdf

[18] Straightening Out the Costs: Report 2025 - National Hair & Beauty Federation

 

 

[19] NHBF State of the Industry survey (September 2024) NHBF State of the Industry Summary Sept 2024 - National Hair & Beauty Federation

[20] Hair & beauty sector survival story: state of the industry surveys 2020-2022 (NHBF, 2022)