One of Britain’s favourite fast-food chains has been hit with a £4million tax raid thanks to Rachel Reeves’ Budget, its boss has said.
John Eckbert, 57, Chief Executive of Five Guys, said the Chancellor’s decision to increase employers’ National Insurance (NI) contributions from April would severely slow his company’s growth plans.
With the 6.7 per cent rise to the minimum wage also coming into play this Spring, the 57-year-old said the total cost to his business could well surpass the current £4million hit.
Mr Eckbert said their ability to provide the British market with new job openings will also be severely depleted.
‘Every new store that we open creates 50 to 75 new jobs,’ he told The Telegraph.
‘It’s £1million in construction expenses and all the jobs that creates. There’s a huge knock-on effect for every investment that we make. We obviously can’t grow as fast.’
The 57-year-old said he, alongside other leading hospitality firms, raised concerns about the impact this would have on growth to the Government, but they were quickly shrugged off.
In October’s Budget, Chancellor Rachel Reeves launched a huge £25billion assault on businesses through the changes to NI contributions, which the food chain boss says had not been ‘thoroughly thought out’.
The changes will see the rate of employers’ NI contributions rise from 13.8 per cent to 15 per cent, with employers also now paying tax on workers’ earnings over £5,000 per year, when it was previously capped at £9,100.
The increase also threatens to impact Britain’s already struggling high streets, which have seen the closure of many long-standing businesses due to the impact of the COVID pandemic.
‘There’s a great justification for food and beverage taking up a bigger part of the high street and this obviously doesn’t help that effort,’ Mr Eckbert said.
In order for the business to remain sustainable, he has warned that the already pricey Five Guys may have to start charging customers more money for their burger fix.
Despite the cost of a cheeseburger from Five Guys being five times more expensive than that of one of its rivals, McDonald’s, the boss said they had already been fighting to keep prices low due to the rising costs of beef.
With the meat now costing £6.20 per kilo compared to £3 when the fast-food chain first opened, the 57-year-old said they have had to ‘absorb’ some of the losses which sees them now make less money on each burger sold than they used to.
Despite the potential price increases to the menu, Mr Eckbert hopes Brits will still support the business and ‘treat’ their loved ones to a Five Guys burger.
The chain, which now boasts 175 UK restaurants, was formed nearly 40 years ago in Virginia, USA, by Jerry and Janie Murrell, who named the business after their five sons.
Among some of its biggest supporters are Barack Obama, Ed Sheeran, Maya Jama and Mollie King.
A Treasury spokesman said: ‘We delivered a once-in-a-parliament Budget to wipe the slate clean, now we are focused on going further and faster to kickstart economic growth so working people have more money in their pockets.
‘We’re also levelling the playing field for high street businesses, including restaurants, by permanently cutting business rates and removing the £110,000 cap for over 280,000 retail, hospitality and leisure business properties, while also capping corporation tax for the duration of parliament.’
National Insurance contributions (NICs) will not be increased for employees after Ms Reeves vowed not to target ‘working people’ and instead hit firms in order to raise revenues.
The Chancellor acknowledged that hitting firms with higher taxes was ‘a difficult choice’, but businesses said it would ‘batter’ firms in the wake of the Budget.
We told last October how the Office for Budget Responsibility (OBR) said it expects that businesses will ‘pass on most but not all of their higher tax costs to employees’.
It estimated that 60 per cent of the tax would be shouldered by workers and consumers through lower wages and higher prices in the first year the policy is introduced.
The remaining 40 per cent will be absorbed by businesses through lower post-tax profits.
However, from 2026/27 onwards, it predicted that 76 per cent of the cost will be passed on through lower wages, with 24 per cemt paid for through company profits.
That counters Labour’s manifesto commitment to shield ‘working people’ from the impact of tax increases.
Kate Nicholls, chief executive of UK Hospitality, previously warned of a ‘painful’ time for hospitality businesses this year due to an increased annual tax bill of £3billion for the sector.
‘This Budget is the latest blow for hospitality businesses,’ she said.
‘Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.
‘In the short-term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it.
‘Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.’
The Budget is also set to have ‘dire’ consequences for charities, who are expected to be hit with a £1.4billion raid.
Despite their pleas to be excluded from the additional tax bill, the Chancellor refused to exempt them.
Bosses have said they will be forced to axe services, lay off staff or even shut down as a result of Labour’s tax bombshell.
The National Council for Voluntary Organisations (NCVO) warned the jobs tax hike would deliver a devastating £1.4billion-a-year blow.
Chief executive Sarah Elliott previously said many charities were already in a ‘dire situation’ as a result of the cost-of-living crisis, which has hit their own costs and dented fundraising.
In a joint letter to the Chancellor with Jane Ide, of the Association of Chief Executives of Voluntary Organisations, she said the move not to exempt the sector ‘will place a major strain on charities at a time when we are already struggling’.
They added: ‘Our sector will have less flexibility than ever before to absorb these increasing costs. Many of us will have to make difficult choices in the coming months as a result.
‘The harsh reality is that many organisations may be forced to reduce staff, cut salaries and, most importantly, scale back services for the very people they strive to support.’