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Hapless Hospitality: Just One-Third of UK Pubs, Restaurants, and Bars Optimistic About Future

With the hospitality sector experiencing an eighty-one percent surge in energy prices over the past year, industry bosses have declared that just twenty-nine percent of businesses feel hopeful for the next twelve months.

The hospitality sector has had to ride an exceptionally difficult storm over the past several years. The COVID-19 pandemic, energy price rises, staff shortages, and increasing food and raw material costs due to inflation have all contributed to the gradual emaciation of the profit margins of many local businesses that provide food and drink up and down the United Kingdom. In very many cases, it has wiped out profit margins entirely. In the first three months of 2023 alone, more than 150 pubs closed their doors for the final time in England and Wales. Hospitality leaders have stated that the sector has been ‘at breaking point for a year now’ and warn many more much-loved venues will be forced to close for good if the future economic outlook does not improve.  

This is a huge problem for the British economy. The UK hospitality sector generates approximately £130 billion in turnover, totalling more than the automotive manufacturing, pharmaceutical, and aerospace industries combined. Establishments also provide essential meeting places for social and business activity. Mass closures should concern both citizens and politicians alike.

Sector and UK economy

Despite wholesale gas prices falling to their lowest levels since Russia’s invasion of Ukraine, some businesses were forced into long-term fixed-rate contracts when energy prices were on the rise in mid-2022. Data from Curren Goodden Associates (CGA) found that forty-six percent of businesses on these contracts felt their establishment was at risk of failure within the next twelve months. More broadly, they found that eighty-six percent of the entire industry was concerned about all costs in the immediate future.

The sector will not welcome the news of the announcement from the National Union of Rail, Maritime and Transport Workers and the Associated Society of Locomotive Engineers and Firemen trade unions that fresh train strikes are taking place over the half-term. The walkout will disrupt the tens of thousands of spectators hoping to make the journey from Manchester to Wembley Stadium for the FA Cup Final on Saturday, 3 June. The knock-on effects of rail strikes are only too well known to the hospitality sector. According to figures from UKHospitality, the cumulative financial damage inflicted on the industry from the ongoing dispute between the unions and train companies has amounted to approximately £3.25 billion. This figure includes the expected economic fallout from the latest round of strikes.

As a result of this current economic and industrial predicament, the hospitality industry is calling on the government to further support struggling businesses to weather the storm. The UK’s four largest hospitality industry groups – the British Institute of Innkeeping, UKHospitality, the British Beer and Pub Association, and Hospitality Ulster – have issued a combined plea for more governmental assistance, especially for the ‘thousands locked into contracts who will be obligated to pay extortionate rates well into next year.’ The statement acknowledged the ‘short respite’ the government’s Energy Bill Relief Scheme gave to many businesses’ energy bills since October 2022, but criticised assistance ‘falling away.’ The Energy Bill Discount Scheme currently offers a lower level of support for businesses than the October 2022 scheme and is set to expire in March 2024. The government believes they have helped businesses save around £6.9 billion.

After work drinks

The CEO of UKHospitality, Kate Nicholls, believes it is the wider economic situation that is hurting the hospitality industry the most. She believes that ‘the demand from the public is quite clearly there, with revenue exceeding pre-Covid levels, but there is no way venues can take advantage of this demand as they drown amidst price rise after price rise.’ If customers are noticing the price increases of an evening meal or post-work pint, they ought to remember that pubs and restaurants are ‘simply unable to pass prices onto the consumer at the same rate they are experiencing their own cost rise.’ Industry leaders have suggested a relief to Value Added Tax and business rates reform as measures that could assist the growth of the industry amid economic instability.

The latest expressions from the hospitality sector highlight the dire situation many establishments are facing. A hobbling hospitality industry impacts the socio-economic makeup of the country. ‘Left unresolved,’ the four industry groups stated, ‘it will have a lasting wider impact long into the future, impacting local employment, supply chains and removing essential community hubs from villages, towns, and cities across the UK.’  The rising number of places closing for good supports this statement, which has increased by sixty percent compared to the first three months in 2021.

The situation is tricky for the government. They have already provided financial support for the sector, and the total UK’s total national debt is eye-wateringly high. There is also a perception that, as a result of Brexit, the Union is diverging further. Northern Ireland does not benefit from a seventy-five percent business rates reduction currently on offer in Great Britain. Willie Jack, the owner of two pubs in Belfast, looks with jealousy at the favourable terms to those in the Republic of Ireland, stating that Northern Irish trading conditions were already ‘extremely unfair’ due to lower VAT on energy bills and lower corporation tax in Ireland. Combined with the recent local election results in Northern Ireland that showed a dramatic drop in the Unionist vote, the break-up of the United Kingdom may be forthcoming. Moreover, with over 132,000 job vacancies in the hospitality industry and net migration at 606,000, the notion that the immigration system is ‘not working effectively’ for businesses is one that many voters will find perplexing.

Restaurants attempt to survive amid rising costs

All of this reveals the damaging state of the UK political economy in a post-Brexit, post-Covid environment, as trade is subject to more difficulty and elements of working from home have become partially embedded within many industries. The Conservative government has consistently committed to delivering economic growth, and the success of the hospitality sector will be essential to achieve this. Yet there is clearly widespread pessimism within the industry. A financially strapped and cynical sector stifles creativity, depreciating the quality of independent establishments and the experience customers have in those settings. It damages the welfare of staff, who are often overworked and underpaid as organisations struggle to fill vacancies. It discourages start-ups and SMEs, which are at incredible financial risk in their infancy, with larger chains able to take the brunt of rising costs.

The hospitality sector plays an indispensable role in the UK economy, providing jobs and tax revenues that allow for the implementation and delivery of high-quality public services. They also offer safe spaces which create memories that last a lifetime. The hospitality sector should be given the support it needs to thrive in the 2020s.    

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