By Denis Sheehan, Publisher, H&C News: Government and opposition asleep waiting for the straw that will finally break hospitality’s back.
The Covid-19 Pandemic
On 23 March 2020 the first UK Covid-19 lockdown was enforced, with countless iterations further enabled between then and 17 May 2021 when restrictions were finally lifted. Every hospitality businesses that managed to survive the lockdowns deserves a medal, as do all the people working with them.
Throughout the many lockdown periods countless people were faced with closing the businesses they built and loved, and letting go of people they worked alongside for years.
Those that survived then faced difficult trading conditions as reopening began, the most difficult of which being finding people with the skills and experience required to operate.
People and Skills Shortages
More than a year on from the reopening the people and skills shortages have got worse, currently there are 176,000 job vacancies in hospitality, according to the Office for National Statistics.
Alongside the ONS vacancies lies what many are calling full employment in the UK, although interpretations of what that means vary enormously. The latest ONS figures for total job vacancies in March to May 2022 rose to a new record of 1.3 million. Unemployment figures for the same date range are down, seeing for only the second time in its history the UK with more vacancies than people unemployed.
As a consequence of fewer people applying for and taking on jobs in hospitality operators are increasingly forced to limit opening hours, which in turn of course reduces revenue and profit. As well as tax revenues for government.
Inflation
Since reopening began inflation has been rising with the Consumer Prices Index (CPI) most recently reported to have risen 9.4% in the 12 months to June 2022. The June figure was the highest annual CPI inflation rate in the National Statistic series, which began in January 1997.
Within the inflation data food prices are climbing faster than the index headline figures, with cooking oil, bread and meat leading the way. International commentators including US bank Citi, are quoted in Reuters forecasting even worse numbers for the UK economy to come.
Citi economist Benjamin Nabarro wrote in a note to clients: “Food inflation (in the UK) overshot our forecasts. We now expect price growth here to peak at a little over 20% in Q1 2023, with producer price inflation here continuing to accelerate.”
Energy
Energy prices have risen at never before seen rates already this year and utilities consultancy BFY Group have predicted a truly eye watering further 74% increase this October as Ofgem are set to install a new ‘cap’ on energy prices. Martin Lewis is predicting 78%.
Consumer Spending
Not only will this surge in energy prices serve further detrimental impact to hospitality businesses, but consumers also facing the same rise in household costs will be trimming all non-essential costs, including eating and drinking out.
To avoid falling into fuel poverty in January, a household will need to earn £38,500 per year, the average is £31,400.
VAT Disparity
There is also ongoing VAT disparity to contend with. Food, when purchased raw, is (generally) zero rated. Once prepared, heated and/or eaten on site, it is standard rated. The result? Restaurants, cafes, bars and hotels are paying over 20% of their sales in VAT whilst having little or no VAT to claim back on their purchases. It is more complex than that, but long story short, hospitality businesses are losing out.
If you have managed to get this far and resisted the temptation to scream, thank you and bear with me… a few questions.
Government and Opposition Malaise
What has the government done recently to address this growing economic problem?
Regular readers of H&C News will know I am not a fan of the current government, especially since they ended freedom of movement, crippling the decades old balance of transient multi lingual people from the EU and further afield working in hospitality while they visit the UK, or start a new life here, working their way through a career in hospitality.
The problem here is that restaurants, hotels, pubs, bars, cafes, and every other type of hospitality provider has had one of the keystones of their basic business model removed.
Without relaxing temporary visas, which also hinges on people alienated being willing to revisit old ways of financing their holidays, or making a new life in the UK, it is hard to see where the people to fill the job vacancies will emerge from.
Government is doing nothing beyond campaigning for their next leader, and while they do the opposition has no clear policy that indicates how they would attend to the economy in the short, medium or long term. Not being Conservative is simply not enough.
Some fresh thinking from either side would go a long way to ease nerves in the days, weeks and months ahead, please.
Prior to that, the government need to wake up to what is going on around them and prioritise the electorate’s economic wellbeing ahead of Liz Truss and Rishi Sunak’s ambitions for the top job. Sure, we need a new PM, but if some urgent wake ups around countless government departments don’t start soon, they will preside over business closures and job losses on a scale that has never been seen since the Great Slump of the 1930s.