Claridge's took in almost exactly the same amount of money in 2025 as it did in 2024 — £137.8m of revenue, "broadly in-line" year on year, City A.M. reported this week. And yet it went from a £2m profit to a £9.7m loss. Nobody sold fewer room nights in any way that shows up in that number. The hotel itself said the loss was "predominantly driven by the inflationary change in payroll and related costs", and separately flagged the increase in employer National Insurance and consecutive minimum wage rises as ongoing risks to the business.
My view: this is the cleanest public illustration you'll see all year of a point every UK employer should sit with. Revenue can hold completely flat and a business can still be pushed into a loss purely by what it costs to employ the same number of people doing the same job. Claridge's has the profile — 128 years old, a five-star Mayfair address, £137.8m of turnover — to absorb a bad year without anyone outside its own boardroom noticing. Most Buzz clients don't have that cushion. If a hotel with nine figures of revenue is calling out payroll cost inflation by name in its own accounts, it's worth every smaller employer doing the same arithmetic on their own numbers before the year-end accounts do it for them.
What actually happened
The five-star Mayfair hotel, which opened in 1898 and added a five-storey "mega basement" in 2021, recorded a loss after tax of £9.7m for 2025, reversing a £2m profit the year before, on revenue of £137.8m. The cost of wages and employer taxes rose by more than £1m over the year. Claridge's own filing language is specific: it flagged being "exposed to the risk of future government changes in industrial, fiscal, monetary or regulatory policies, including the adverse impact of the increase in employer National Insurance contributions and consecutive increases in minimum living wages." Greg Hegarty, co-chief executive of PPHE Hotel Group, made the same point about the wider sector to City A.M.: "Hotels are dealing with substantially higher business rates and employment costs, while doing everything possible to remain competitive and minimise the impact on guests."
Claridge's also flagged a rougher 2026 so far, with Middle East visitor numbers to the UK falling to as low as half their normal rate in March following the outbreak of war in Iran, and continued exposure to energy costs and supply-chain pressure linked to the wars in Ukraine, Iran and Palestine. Those are genuine, separate pressures — but they're demand-side and largely outside a business's control. The payroll cost increase is different: it's a policy change with a known size, and every UK employer has been living through the same one since April 2025, whether or not their year-end accounts have caught up with it yet.
The two changes doing the work
From 6 April 2025, the employer Class 1 National Insurance rate rose from 13.8% to 15%, and the Secondary Threshold — the point above which an employer starts paying NI on an employee's earnings — was cut from £9,100 a year to £5,000 a year. The threshold cut is what makes the change bite harder than the headline 1.2 percentage-point rate rise suggests, because an extra £4,100 of every employee's pay now falls into the taxed band, regardless of the rate. Working the other way, the Employment Allowance — which shelters a slice of a small employer's total NI bill — rose from £5,000 to £10,500 a year, and the £100,000 eligibility cap on the previous year's NI bill was scrapped, which genuinely helps the smallest employers.
Also from 1 April 2025, the National Living Wage for staff aged 21 and over rose from £11.44 to £12.21 an hour — a 6.7% increase. The 18-20 rate rose from £8.60 to £10.00 an hour, and the apprentice rate from £6.40 to £7.55. Any business with hourly staff paid at or near these rates — most hospitality, retail, care and cleaning employers — took that increase on every relevant hour worked, whatever happened to footfall or bookings that month.
Worked example: what the same two changes cost a much smaller business
Illustrative, built entirely on the confirmed rate and threshold changes above — not on Claridge's own headcount or payroll, which City A.M.'s report doesn't disclose. Take a 20-employee hospitality business — a restaurant, guesthouse or small hotel — with an average salaried wage of £23,000 across the team, and assume it qualifies for the Employment Allowance (its total employer NI bill is comfortably under the £100,000 cap that used to gate eligibility).
| Employer NI | Before Apr 2025 | From Apr 2025 |
|---|---|---|
| Rate | 13.8% | 15% |
| Secondary Threshold | £9,100 | £5,000 |
| NI per employee on £23,000 | £1,918.20 | £2,700.00 |
| Total NI, 20 staff | £38,364 | £54,000 |
| Less Employment Allowance | −£5,000 | −£10,500 |
| Net employer NI paid | £33,364 | £43,500 |
Even after the bigger Employment Allowance absorbs some of the increase, that's £10,136 a year more, purely from the rate and threshold change, before a single extra hour is worked or a single new hire is made.
Now add the minimum wage. Say 10 of those 20 staff are paid at the National Living Wage on an average 30-hour week. At £11.44 an hour that's £17,846.40 a year per employee; at £12.21 it's £19,047.60 — an increase of £1,201.20 per employee, or £12,012 across 10 staff.
Add the two together and this one business is carrying roughly £22,148 a year in extra payroll cost, with revenue assumed flat. Set that against a realistic net margin for a business this size — say £900,000 turnover at a 5% net margin, or £45,000 — and these two policy changes alone have consumed close to half of it. That's before business rates, energy, food or drink cost inflation, or a tourist levy that hasn't even started yet, are added on top. It's the same shape of story as Claridge's, just at a scale where £22,000 isn't a rounding error against a nine-figure balance sheet — it's the difference between a modest profit and a thin one, or a thin profit and a loss.
What it means for you, depending on where you sit
If you employ fewer than around eight to ten people on modest pay, check your actual numbers before assuming you're squeezed — the bigger Employment Allowance may genuinely leave you better off on the NI side than before April 2025, even with the higher rate, because £10,500 of cover now reaches further down your payroll.
If you're a typical Buzz-sized employer — somewhere between 10 and 50 staff, in hospitality, retail, care or another people-heavy sector — you're almost certainly past the point where the Employment Allowance offsets the change, and you're carrying the increase in full on both NI and minimum wage. The Claridge's story is worth using as a prompt to actually run your own version of the table above, rather than relying on a general sense that "wages went up a bit this year".
If you're already forecasting for the year ahead, build in that this is now the baseline, not a one-off shock — the Autumn Budget on 28 October could add to it rather than reverse it, and minimum wage rates are reviewed again for next April.
What is still uncertain
Whether the Budget adds further employer cost pressure. The Chancellor's Autumn Budget lands on 28 October 2026. Business groups including UKHospitality have been lobbying hard against further hospitality-specific tax rises — including the VAT campaign covered in our previous post — but nothing is confirmed until the Budget itself.
Next April's minimum wage rate. The Low Pay Commission reviews National Living Wage and National Minimum Wage rates annually; the rate that applies from April 2027 has not yet been announced, so it can't be built into forecasts with any precision yet — only flagged as a near-certain further increase, on past pattern.
How much of this Claridge's itself will recover. The £9.7m loss is a single year's snapshot under new ownership arrangements following the death of former Emir of Qatar Hamad bin Khalifa Al Thani in July, whose stake is now devolving to his heirs. Whether pricing, cost control or a recovery in Middle East visitor numbers narrows the gap in 2026 won't be known until next year's accounts.
One thing to do this week
Pull your own headcount and average pay, and run the two-line calculation above against your own numbers rather than Claridge's or the illustrative example: your employer NI bill at 15% on the £5,000 threshold, less your actual Employment Allowance entitlement, plus the minimum wage increase on any hourly staff. If the total is a meaningful slice of your net margin, that's worth a conversation about pricing, staffing mix or cashflow now — not something to discover when the year-end accounts are finalised. Our Payroll & Pensions service runs this kind of check as a matter of course, and it sits alongside the wider view our Management Accounts clients get of exactly which costs are moving and why, month by month rather than once a year.
Source: City A.M., "Claridge's swings to £10m loss as luxury hotel warns on 'adverse impact' of tax hikes", by Simon Hunt, published 11 September 2026. Employer National Insurance and National Living Wage/National Minimum Wage rates and thresholds as confirmed by HMRC and the Low Pay Commission, effective from 6 April 2025 and 1 April 2025 respectively. The worked example uses illustrative figures for headcount and pay, not Claridge's own payroll data, which was not disclosed in the source article. Figures correct at 14 September 2026.