It comes as no surprise when I say that the UK hospitality industry faces significant challenges. This isn’t a revolutionary statement or some very insightful analysis; it is a simple and unfortunate fact.
In the first two months of 2024, over 6,000 hospitality and nightlife venues permanently closed due to the significant pressures on the industry. These closures include everything from small family-run businesses, such as Lewtrenchard Manor in Devon, to massive corporate chains, such as the Hard Rock in Glasgow. The latest victim in the sector is Black & White Hospitality’s flagship Mr White’s restaurant in London, which shut its doors early last week.
The recurring theme with these closures is the current economic state of the country, with a cost-of-living crisis, which has seen an increase in supply and operational costs and a decrease in demand, as consumers are spending less. While this crisis emerged in late 2021 on the heels of the pandemic, it is very much still with us, with around 6 in 10 adults spending less on non-essentials because of cost of living increases as of January 2024. These pain points in the industry are exacerbated with staffing shortages since Brexit and a lack of Government support.
Need for Government support
It is clear reform is needed to revitalise the hospitality industry to help it reach its potential. After several very tough years, hospitality businesses had some relief from the recent Autumn Statement, where the Chancellor extended the 75% discount on business rates. However, this was the bare minimum hospitality owners expected, with no new policies for relief introduced last November, leaving a shadow hanging over the sector. This has persisted with the absence of any further supportive measure in the Spring Budget last week.
Currently, over a third (38%) of UK hospitality operators will fail to make a profit without further support from the government. Since the Autumn Statement, the rates multiplier has not been touched, there has been no further VAT relief and staff shortages are still a big issue.
As a result, industry leaders, peers and trade bodies are advocating for further change. UKHospititality’s latest open letter urges the Government to take action to support the sector. As Kate Nicholls, Chief of UKHospitality noted early last week, the sector is one of the leading employers in the UK, offering employment to over 3 million individuals and injecting over £93 billion into the economy annually. Clearly, it is in the Government and the country’s interest to support our crucial sector.
What can be done to revitalise the sector?
There are multiple actions the Government should consider to underpin the sector’s revival and spur its growth. To address the staffing shortages, now 48% higher than pre-Covid levels, the Government needs to revisit policies such as the minimum income for family visas and the abolition of the 20% wage reduction in certain sectors to ensure the sustainability of the workforce.
To reignite growth, the Government needs to consider temporary reductions in VAT rates for the sector. Such measures would alleviate the burden of rising costs and prevent operators from passing them on to consumers, a trend witnessed by 72% of businesses already. Moreover, with the extension of the business rate discount, it’s high time to address the punitive rates multiplier, currently standing at 51%. Lowering it and reducing the overall burden of property tax, which currently stands at 4% of GDP, would incentivise investment and stimulate growth across the industry.
As industry leaders and trade bodies rightly advocate, the Government needs to demonstrate its commitment to the revitalisation of the hospitality sector. Failure to act now risks irreparable damage, not only to businesses but strikes a blow to the fabric of our society.
