Hair & beauty businesses ‘£41,000 out of pocket’ by end of 2021

By Helena Biggs | 18 February 2021 | Movers & Shakers, News

Woman Finances Stressed Money

Hair and beauty businesses saw up to 57% loss in turnover in 2020, according to a report by the NHBF and independent economic analysts, Pragmatix Advisory.

It also predicts that businesses will be out of pocket £41,000 on average because of the pandemic by the end of 2021, with the annual revenue of the largest businesses down by 42%.

The report, ‘Hair, beauty and the pandemic: An industry at the sharp end‘, also notes:

  • With over 140 days of lockdown in 2020, hair and beauty has been one of the worst affected sectors.
  • Hair and beauty businesses saw an average loss in turnover of 45% in 2020, and as much as 57% in some regions.
  • Social distancing measures mean that even when open they are operating at around 70% capacity.
  • Despite the furlough scheme, full-time equivalent employment numbers were down by 21% on 2019 as staff hours were cut, redundancies made and workers left for roles in other industries with more reliable wages.
  • Owners of hair and beauty businesses took an average cash hit of £17,000 in 2020, with those over the VAT threshold taking an even bigger hit.
  • Across the industry, one in 10 businesses will have failed to deliver any income or dividend to their owners or owner-managers.

Many in the industry are now acutely vulnerable to failure, with 60% of businesses having no cash reserves and two thirds in debt.

The report warns of a ‘tougher outlook’ in 2021, with 1 in 7 businesses acutely vulnerable to fail – rising to 1 in 4 if lockdowns and restrictions are extended.

The report states: “Nobody can predict this year with any confidence, but a reasonable central scenario – of three months of national lockdown followed by six of tiered local social distancing measures, before restrictions are lifted for the last quarter of the year – places further strain on already stretched hair and beauty firms.

“The biggest businesses will be the most at risk in 2021. We estimate that 14%  of businesses over the VAT threshold will be acutely vulnerable to failure. This rises to a quarter when considering a more pessimistic downside scenario, where various pandemic control measures remain in place for the full year.

“Once the industry can reopen, a reduction in the rate of VAT to five per cent, as now applied to the hospitality sector, will make a material difference to hair and beauty businesses struggling under the financial burden of the pandemic.”

“A reduction in the tax rate will provide on average an additional £16,000 in 2021 for VAT-registered business. It will reduce the share of these businesses that are unable to pay any income or dividend to their owners or owner-managers from 14 to 6%.”

On the back of this independent report, the NHBF is fighting for both the VAT cut to 5% and a personal care fund for hair and beauty businesses forced to close.

To view the full report, click here.