The £5bn-a-year tax timebomb that's set to devastate London hospitality

The capital will bear the brunt of Rachel Reeves’s National Insurance raid

- JONATHAN PRYNN

London businesses face a £5 billion a year National Insurance timebomb that threatens to bring devastation to the capital's already struggling high streets and town centres.

Analysis of Government statistics by the London Standard suggests that around a fifth of Rachel Reeves's £25 billion annual NI raid on employers announced in the Budget will fall on the capital. That will mean particular hardship for "labour-intensive" employers in sectors such as hospitality, retail, construction and logistics, all of which play a crucial role in driving London's economy. They warn that it will bring pay and hiring freezes, higher costs and prices and, inevitably, business failures, particularly among smaller enterprises, when the new rates kick in next April.

The Chancellor announced in her Commons statement last month that the rate of employer NI will go up from 13.8 to 15 per cent. That had been expected, but employers were shocked to learn the threshold for paying the tax will come down from £9,100 to £5,000. This means employers will have to pay NI contributions for the first time on the pay of thousands of lower-paid part-time workers and students.

The move will raise £25.7 billion a year by the end of the decade and was by far the biggest single tax-raising measure in the Budget. The Chancellor said that while it was "a difficult choice" that she did not take "lightly", it was the "right choice to make" in the light of the £22 billion hole in the public finances.