The UK’s hospitality sector, a cornerstone of the nation’s economy, society and culture, finds itself in the midst of a severe cost crisis.
Escalating costs threatens to dismantle the sector’s hard-fought progress towards recovery and stifle its potential for future growth.
At the heart of this crisis lies the changes to employer National Insurance Contributions (NICs). The decision to lower the threshold has unleashed a financial tsunami upon the hospitality industry, as part of an additional £3.4 billion annual burden that came into effect this month.
This substantial increase in operating costs will force businesses to make agonising choices, with job losses and reduced working hours becoming an inevitable consequence.
The ramifications of this policy extend far beyond mere balance sheet adjustments. The Government’s own analysis predicts tens of thousands of lost jobs. This will be part of a series of decisions businesses are forced to make, including freezing recruitment and curtailing staff hours. This domino effect will inevitably lead to suppressed wage growth, further impacting the people who rely on the sector for their livelihoods.
The NICs changes represent only one part of the multifaceted cost pressures hitting the hospitality industry. Outdated business rates and a high rate of VAT continue to impose a disproportionate burden on businesses, stifling investment, hitting our competitiveness and hindering growth.
These constraints have long impeded the sector’s potential, preventing it from fully realising its true potential.
We recently launched our Social Productivity Index, a new report that quantifies both the sector’s social and economic impact. This index reveals that hospitality stands as the top-performing, most socially productive sector in the economy, a testament to its vital role in supporting communities and driving investment.
Interestingly, many of the sectors the Government is prioritising in its Industrial Strategy, rank towards the bottom. These sectors are simply unable to reach every part of the UK and support people from all backgrounds with job opportunities like hospitality does.
That’s why the Government needs to include foundational sectors in its industrial strategy, if it really wants to create a fairer and more equitable society right across the UK. We are the sector that can deliver these ambitions.
We’re taking that message to the heart of Government, to deliver meaningful change for hospitality businesses.
Speaking of meaningful change, this month also saw the Government’s commitment to reform the broken business rates system become law. Our campaigning means that restaurants will soon receive a permanently lower level of business rates, which will begin to address the burden that has fallen on the high street in previous decades.
We are continuing to push the Government to apply the maximum possible discount for our sector, when it reveals the rates in the Autumn.
We all know that hospitality is a vital component of the UK’s social and economic fabric, as a source of employment, a creator of growth, and a driver of regeneration in our towns and cities.
This must be recognised and supported, rather endlessly taxed. An inability to do so threatens businesses, jobs and the regeneration of our high streets.
Kate Nicholls is chief executive of UKHospitality