The Spring Budget must support the hospitality industry to spearhead the UK’s economic revival
Unless traipsing through the remotest parts of far-flung constituencies, and perhaps even then, you’re never too far from a welcoming pub or restaurant that’ll serve you food and drink, or a venue that’ll provide entertainment and a warm space to relax.
Hospitality is ubiquitous, omnipresent, universal. Hospitality is, indeed, everywhere.
It’s this presence across every constituency in the nation that underlines the sectors importance to the nation, our economy and the public finances, generating £139bn in economic activity and more than £30bn in tax receipts to the Treasury.
People in villages, towns and cities across our four nations rely on the sector for employment, with around three million people working in our venues. This scale makes hospitality the third largest private sector employer in the United Kingdom – double the size of financial services and bigger than automotive, pharmaceuticals and aerospace combined.
A new, lower business rates multiplier for hospitality would help bring the tax system into the 21st century
For the past three years, hospitality has taken a hell of a battering; first from Covid, and more recently due to spiralling energy costs, an out-dated and unfair business rates regime, chronic staff shortages, the cost of living crisis and stifling red tape.
But ours is a robust, resilient, determined industry and the thousands of operators out there – running everything from pubs, restaurants and bars, to hotels, nightclubs, coffee shops and wedding venues – are determined that with the right support they can bounce back and, as a sector, spearhead the UK’s economic revival.
We’re about to arrive at an important juncture in that revival – the Spring Budget. It’s a red-letter day for hospitality and one that we hope will begin to tackle the three root causes of price inflation in our industry: energy, recruitment and taxes.
In our Budget submission to the Chancellor, UKHospitality – which represents more than 750 companies operating around 100,000 venues – has highlighted how the right support and intervention on energy, unlocking the labour market and reducing the sector’s taxes, can deliver growth and lead to a significant reduction in the rate of inflation, which is desperately needed.
At the moment, rocketing cost increases, particularly across energy, food and drink, has left hospitality venues with little choice but to pass them on to the customer, thus unfortunately contributing to the overall rate of inflation. Venues don’t do this lightly. They want to keep prices low for consumers, but the reality is that many simply cannot survive without some level of price increases.
On the current path, with energy support set to significantly reduce in April and inflation not dropping quickly enough, cost pressures will intensify and drive-up prices further, with most operators already planning to raise prices by 6-10 per cent when energy support is reduced from April.
Let’s be clear, the government’s initial energy support package was a lifeline for many and hugely welcomed by the industry. However, without access to the dedicated top-up support for energy intensive sectors, the planned levels of support in April will not be enough to stave off business failures.
The behaviour of energy suppliers has a big part to play in this, and we’re urging the Chancellor to give clear direction to Ofgem at the Budget to intervene in the non-domestic energy market, and instruct suppliers to renegotiate over-inflated contracts.
Venues will also be hoping there is good news on business rates and VAT on 15 March. In particular, the introduction of a new, lower business rates multiplier for hospitality would help bring the tax system into the 21st century, and a temporary, reduced rate of VAT would stimulate growth and cut costs.
At the moment, far too many businesses are not operating at full capacity due to cost pressures and staff shortages. Introducing measures that can help tackle the root causes of these pressures, as well as further incentivising businesses home-grown recruitment through reform of the Apprenticeship Levy, will unlock the undoubted, but pent up, potential of hospitality.
Channelling Coleridge, then: “Hospitality’s everywhere, but without any help it’ll sink.”
Kate Nicholls, chief executive of UKHospitality.
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