Tourism and hospitality industries are still facing a perilous future – more government support is needed to turbo-charge recovery
As we emerge from the Covid crisis, the regional importance of the hospitality and tourism sectors should make them a significant part of the government’s levelling up agenda.
Last week marked English Tourism Week, a campaign to celebrate the vibrant and diverse offer of the hospitality and tourism sectors across the country.
The value of these sectors has been clear over the last few weeks, with the partial reopening of hospitality businesses revitalising high streets and communities right across the country. It has been fantastic walking around my constituency of St Austell and Newquay over the last few weeks and seeing a buzz that has been sadly absent for much of the last 16 months.
Consumers have returned with enthusiasm, initially braving the cold (and rain!) to socialise with friends, colleagues, and loved ones. As we approach the 21st of June and, hopefully, the full ending of restrictions, the businesses that I have spoken to are delighted to be able to finally look to the future with a degree of optimism. For an area that is dependent on tourism for a significant part of its income, the message from Cornwall is clear: full speed ahead!
For all the optimism around reopening, both industries are still facing a perilous future after over a year of limited trade
Given the disproportionate impact of Covid-19 on the hospitality and tourism sectors, it is unsurprising that the economic impacts of the pandemic are, and will continue to be, felt most keenly in constituencies like mine, with a higher proportion of hospitality and tourism jobs. For all the optimism around reopening, both industries are still facing a perilous future after over a year of limited trade. A return to profitability is estimated to still be six months off even after all restrictions are removed.
In some rural and coastal regions, it is not uncommon for the hospitality and tourism industries and their supply chains to account for over 40% of all employment. These industries are the lifeblood of communities across the UK and the livelihoods of thousands of people are dependent on a strong return from the sectors.
Hospitality alone represents 25% of the Cornish economy. The town of Newquay in my constituency is more reliant on tourism, leisure, and hospitality businesses than any other area in England and Wales, with over 50% of all employees in Newquay working in these businesses.
In our recent Coasts and Waters inquiry, the APPG for Hospitality and Tourism found that the broader economic contribution of hospitality and tourism to rural and seaside destinations is a staggering £34bn per annum. This makes hospitality and tourism the the largest non-governmental mechanism for transferring wealth to rural and seaside economies. The pandemic has thus hit these areas hard, but as we emerge from the crisis, the regional importance of these sectors should make them a significant part of the government’s levelling up agenda.
Over the last year the government has invested a lot in hospitality and tourism, including several measures in the recent Budget. This is both a recognition of the economic and employment importance of the sectors as well as an acknowledgement of the role that they will play in rebuilding the economy after the pandemic. Current support has undoubtedly saved many thousands of businesses and potentially millions of jobs. But to turbo-charge recovery three key areas for support have been identified.
The first of these support measures is the permanent reduction in the rate of VAT. VAT is currently reduced as part of the government support measures until April 2022 – rising from 5% to an interim rate of 12.5% in October. However, after this, there is a compelling argument to retain the lower rate of VAT. This would give UK businesses parity with competitors on the continent who have been supported with lower VAT rates for years.
Secondly, businesses rates reform. Business rates have long been a thorn in the side of the hospitality sector, with a tax based solely on property always likely to disadvantage a sector that relies on space to provide a welcome and comfortable experience. The government must proceed with reform of the current system, with hospitality overpaying by billions of pounds each year, relative to the sector’s turnover.
Finally, it is essential the government works with all stakeholders to find a resolution to the issue of debt built up during the crisis within the sector. This cost alone could sink hospitality businesses just as they reopen to welcome customers for the first time in months.
All these measures come at a cost, but the reward for investing in hospitality and tourism is significant. With these support measures in place, hospitality and tourism businesses can generate a rapid return to national economic growth, while making a significant dent in the post-pandemic unemployment rate.
In the short term, support for businesses must come from the consumer. Hospitality businesses have been among the most generous during the pandemic, donating food, providing rooms for key workers and raising money for various charitable causes. We must now play our part to support these industries through the final weeks of restrictions and through to a great summer of hospitality.
I would encourage everyone to get out and support their local hospitality and tourism businesses.
Steve Double is the Conservative MP for St Austell and Newquay and chair of the APPG for Hospitality and Tourism.