UK exhibitors of every stripe are warning sites may close, screenings will be reduced and expansion plans put on hold following the rise in tax
UK exhibitors of every stripe are warning sites may close, screenings will be reduced and expansion plans put on hold following the rise in tax charges for employers and an boost in the minimum wage for workers announced by the Labour government last month.
The UK government is increasing both the national living and minimum wage levels and pushing up employer national insurance contributions by 1.2% from April 2025.
Paul John Anderson, director of the Dublin-based Omniplex Cinema Group, which has 20 sites in Ireland and 22 in the UK, confirmed the company may have to change how it operates.
“We are probably going to employ less people and will look at consolidating our opening hours,” he said. “If a cinema opens on a Monday at 2pm, we might shift that to open later….it puts pressure on every site. At smaller locations where there is lower footfall, it starts really to erode margins. It would definitely make me think twice about major investments into the UK market for the short term.”
Anderson said he feared the increased costs for cinemas will play directly into the hands of the gigantic streamers.
“Cinema and Netflix aren’t direct competitors when it comes to selling tickets but in relation to the time consumption of people, we are competing [with Netflix],” he said. “A minimum wage increase isn’t on the radar for Netflix. Generally speaking, they are employing people who are office-based and on higher salaries. It doesn’t impact them or their bottom line.”
Phil Clapp, chief executive of the UK Cinema Association (UKCA), predicted there could now be “double digit percentage increases in the overall wage bill for cinemas, reducing their ability to recruit and further recover”.
“Across the piece, this presents challenges for every cinema, regardless of scale, regardless of business model. The core of the cinema offer is staffing. It’s customer service.”
The minimum wage for 18 to 20-year-olds will rise by £1.40 to £10 an hour – up 16.3%, and the rate for 16 and 17- year olds will boost by 18%, to £7.55. The National Living Wage for those aged 21 and over will go up 6.7% to £12.21 an hour.
Clapp believed this may push up wages at every level. “The challenge is not just in meeting these costs but the differentials – more senior and experienced staff expecting to maintain some [pay] difference between themselves and the entry level [workers],” he said. “That’s actually where the real bite from these changes come.”
Combined with the national insurance contribution from employers, the measures may boost cinema payroll costs by “somewhere between 6% and 12%”, said Clapp. “It is fairly self-evident the sector is not really in a place where it can easily absorb those kinds of costs.”
Clapp acknowledged “significant numbers of cinemas use low-hours contracts” but said this reflected the uncertain demands of the business. When films fail to perform to expectation, sites will respond by “putting less staff on”. He claimed there were sections of the workforce who still wanted the flexibility that low-hours contracts give them – and he strongly disputed the suggestion UK exhibitors were part of the precarious “gig economy”.
“When the government talks about zero and low-hours contracts, It uses the phrase “exploitative.’ I would be as certain as I can be that none of the people the UK Cinema Association represents could be accused of being exploitative,” he said.
Omniplex’s Anderson said he thought a rise in ticket prices was unlikely but Clapp said it could not be ruled out.
“Given the fragile nature of the [cinema] recovery still, there is absolutely a reluctance to pass those costs on to customers in terms of increased ticket prices but something needs to give.”
The average UK ticket price in 2023 was £7.92, a 3% boost on 2022.
Smaller venues
There is disappointment the tax rises are the same for every employer, regardless of size.
Clare Reddington, CEO of Bristol venue Watershed, gave a stark insight into the financial challenges facing smaller, cultural organisations when the changes come into effect next year.
“Ensuring an appropriate and ethical wage for staff is absolutely important for us. We are not against raised taxes at all – but that kind of raise is really substantial,” said Reddington. “We are a charity. We are fulfilling a social impact, cultural impact [agenda]. We are not putting our profits to shareholders like some of the gigantic chains are.
“We were really hoping that there would have been some kind of exemptions for charities around the National Insurance rise.”
“If you are returning profits to shareholders back in America, I think it is OK to have a different form of taxation,” Reddington added. “[But] we are certainly contributing to society across the board with the work we do with young people and with diverse communities. I would hope people would understand it is a slightly different model.”
Watershed’s total salary bill is £3.5m this year. Reddington estimated the organisation will now be looking at an boost of £124,000 because of the impact of National Living Wage increases (Watershed actually pays Real Living Wage which will have an even larger boost than this), and another £75,000 for the added national insurance changes. This adds up to £199,000 – a 5.71% raise.
“We are certainly having to ask ourselves really serious questions before any new hires are made,” Reddington said. “I don’t think we will reduce our staff because post-Covid we are pretty lean as it is – but we are certainly asking the staff who work for us to do more.”
Savings
The UKCA’s Clapp revealed operators are now looking to see what further services could be automated to save on wage costs. “That is almost the antithesis of the kind of service and the human touch we have always seen as the USP of cinemagoing.”
Cinemas are required under licensing laws to have certain minimum levels of staff. According to Clapp, some operators reportedly believe their sites will no longer be viable.
“They tend to be smaller sites in smaller towns where there isn’t seen to be the potential for growth,” Clapp said of where cinemas may now close. “We are nowhere near the success of pre-Covid. When we might see that again is very difficult to tell, but this is a further bump in the road,”.
Furthermore, a rise in the cost of the tender drinks levy is giving exhibitors an additional headache.
“[The levy] increased from 24p to 25.9p a litre for the highest category and from 18p to 19.4p on the second level of levy,” wrote Tim Richards, founder and chief executive of the Vue Cinema chain, in an op-ed piece for the Sunday Times on November 3. “This might feel like small amounts to some… but anyone who has taken their family out knows all these things add up.”
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