The hair industry has been one of the most affected sectors from the pandemic and the National Hair & Beauty Federation’s (NHBF) latest report shows turnover falling by 45% in 2020, compared to 2019.
Due to social distancing restrictions, salon capacity fell to 70% of what it was before the pandemic began, with hair businesses losing on average two hours of appointment time per stylist per day, the report found.
The average cash loss to a business in 2020 was £17,000, with those over the VAT threshold taking an even bigger hit, and one in 10 businesses did not return any income or dividend to their owners or managers, the data revealed. Full-time employment in the sector is also down 21% on 2019 figures.
As such, the NHBF states that there are now many hair and beauty businesses which are acutely vulnerable to failure in the next 12 months, especially as 2021 is expected to be just as tough a year as 2020. Without further support from Government, most expect to survive two-to-three months (from January 2021) if coronavirus lock-down continues, the NHBF’s report states.
The report also revealed that the Covid-19 crisis has a disproportionate impact on women and those in deprived communities – for example, hair and beauty business owners are 82% female, with an 88% female workforce.
There is also a higher proportion of personal care businesses than any other sector in the most deprived areas of the UK, with closure of these places posing a risk to those in the local community who are most likely to be employed at these salons.
Reducing VAT to 5% would add £16,000 to the average VAT registered business, closing the cash gap by one-third, states the report. This would reduce to 6% the proportion of businesses not returning anything to their owners or managers.
If 18% of the businesses which would have otherwise failed survive as a result of reducing VAT to 5%, then the policy pays for itself through the taxes they will pay.
Talking about the NHBF’s report findings, chief executive Richard Lambert said: “While the future could be bleak for the personal care sector, intervention now and immediately following reopening will have a life-changing positive effect. There’s nothing coming in, but the overheads still have to be paid. When we are closed, we are closed. We can’t diversify into takeaways and online sales.
“The personal care sector is calling for a specific grant to support businesses through the immediate cashflow crisis, in line with similar funds that have been afforded to many other sectors, including the arts, hospitality and leisure, and the aeronautical industry, among others.”
He added: “We also need support after reopening to keep cash in these businesses so they can recover. The bigger businesses have been hit the hardest and are now the most vulnerable to failure. A targeted VAT cut to 5% would allow them to re-build, invest in staff and apprentices, and once again be the heart of their high streets and communities. We’ve shown this move will pay for itself, so it’s a cost-effective solution for the Government.
“Right now, it feels like we are last in line for support, flippantly disregarded within Parliament and overlooked by Government, despite the billions of pounds we contribute to the economy each year.”
The NHBF has been working with the British Beauty Council (BBC), British Association of Beauty Therapists and Cosmetologists (Babtac) and the UK Spa Association (UKSA) to lobby the Department for Business (BEIS), the Treasury and the Cabinet Office for an urgent Personal Care crisis fund and a reduction in VAT.