Challenges in the hospitality sector

As we reach the end of September, it is fair to say that a lot has happened.

A new Government was formed and it has now been in situ for circa 20 days and we have had positively (with caution) a mini-budget announcement a few days ago, that promises to cut taxes and in turn generate Economic Growth for our country. Whilst not an Economist, I thought I would try and demystify to most, of what this means for the Hospitality Sector; but firstly, will introduce you to the challenges that sector continues to face.

Over the last few years, the hospitality industry has faced severe labour shortages as a result of Brexit and exacerbated by the Covid-19 Pandemic to an extent never seen before; leading to double digits growth in payroll costs; combined with the rising costs of supply including food and drink and the energy prices exponentially growing, has increased the pressure in Hospitality businesses that generally speaking have lower profit margins.

As most of you will know, our industry employs more than 5 million people directly and indirectly and contributes more than £130 billion to the UK Economy, and is the UK 3rd largest employer, and it was because of this that the Industry was, on the whole, expecting a few more initiatives that would allow keeping small to medium-sized hospitality businesses viable such as a VAT reduction (currently UK Hospitality has the higher VAT rate in Europe); business rates relief for existing businesses and concrete support on the energy crisis; unfortunately, whilst the Hospitality industry is grateful for any support that we can get; we fear that on a time when you are facing massive increases in costs across the board, whether it’s labour, energy, fresh produce, dairy, cooking oil, the measures taken feel very much like a drop in the ocean.

All in all, we fear that many hospitality businesses will be closing their doors this Autumn/Winter as it has become unsustainable to continue to do business, and other than the direct impact of this on the economy, there will naturally be an indirect impact on people wellbeing, as we all know that human nature requires socializing, and the lack of t, naturally puts a strain on people.

Despite this, we are still hopeful that key measures around VAT and immigration will be announced soon, allowing for UK Economic Growth.

Author: Francisco Macedo, IoD Berkshire Ambassador Hospitality & Tourism

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