Unlocking the industry’s potential
On 3 March 2020 Leo Skinner, Charlotte Rees-John and Adam Boyd held a Q&A session with Kate Nicholls, OBE, CEO of UKHospitality about the issues facing the industry and how best to unlock the industry’s potential as we emerge from the pandemic. The following is a summary of the key points discussed. You can also listen to the recording of the session here.
Industry Staffing Crisis
The sector is facing recruitment challenges and needs to work to encourage people to want to work in the sector. The industry needs a sector wide employer brand strategy. Hospitality Rising is the official hospitality industry response to the recruitment crisis and is backed by the hospitality and tourism skills board.
UKH have published an employment plan for creating jobs in hospitality as a career which you can find here
The importance of ESG
In order to attract new people to work in the hospitality sector (including but not limited to Gen Z’s) employers should have a clear ESG (Environmental, Social, Governance) charter.
From an ESG perspective good looks like:
- Environmental – A clear strategy which is well communicated to both clients and staff. Ensure staff realise that the environment matters to you as an employer;
- Social – A diverse and inclusive workforce. Operators need to embrace neurodiversity. Have a D&I policy and communicate this to staff. Think logically about recruitment e.g. are CVs appropriate in hospitality today or should applicants be encouraged to record a short video of themselves displaying the skills needed to work in the sector.
- Governance – diversity within senior leadership teams is important. Senior leaders must embrace and commit to ESG
Many of these measures can be introduced at minimal cost and should be introduced by all operators including SMEs. It is important to demonstrate commitment to ESG to both customers and staff.
Immigration – is it about to change?
No. The Government looks unlikely to make changes to immigration rules but they are including the right to work in the UK for a limited number of years as part of certain trade deals e.g. recent Australian trade deal.
The Immigration Skills Charge remains an issue for the sector. This was introduced to discourage immigration so now seems to be a double whammy. UKH are campaigning for its abolition.
What is the Government’s plan for Levelling Up?
The Government’s levelling up proposal is complex and touches many sectors. In essence, it is about creating great places to live, work and invest. To attract life sciences, sustainable energy etc into new parts of the country will require “gentrification” which will be a boost for hospitality. It will also require transport links to cultural hubs in the regions.
Overhaul of property legislation
Property legislation will require updating as much of it is no longer fit for purpose. The planning regime is one of the major frustrations for operators wanting a change of use or new development. It is an expensive and protracted process which causes significant delays to acquisition programs. Need to wait and see if the licensing regime is still efficient in a post covid world. There may be an opportunity to streamline planning and licensing regimes in future.
Cafe Culture – will it continue?
The national pavement licensing regime has boosted the sector introducing café culture into many urban areas. The hope is that local authorities will take a pragmatic approach to continuing this for the future.
End of Covid support for the sector
The support introduced for the sector during the pandemic is all designed to taper away at the end of March. Now cost price inflation, VAT, National Living wage and national insurance increases have all come at the same time when many operators have no cash reserves and the moratoria on rent and insolvency are coming to an end. It is the perfect storm.
Many businesses are very vulnerable and will become unviable.
UKH estimate that around 18% of leasehold premises have still not agreed a rent deal with their landlords. Non payment of rent is still a significant issue for many.
Statutory Arbitration Scheme – what are the concerns?
The statutory arbitration scheme will come into force on 25 March 2022. Draft statutory guidance for arbitrators has been published here
Concerns:
- if this is a “quick and dirty” arbitration process will the arbitrator be able to adequately assess a tenant’s viability?
- Will an arbitrator look at the viability of each site individually rather than the whole business as a whole?
There will be a review of the consistency of awards after 4 months – many tenants will want to wait until this point to start the process.
As insolvency protections come to an end at the same time operators must ensure that they are a viable ongoing concern.
UKH will produce benchmarks, templates and financial metrics for use by all operators going through the arbitration process.
VAT set to increase
VAT on food will rise again to 20% unless the sector can persuade the Government to agree to an extension. See UKH campaign #VATsENOUGH here
The biggest cost in a hospitality business is staff. The staffing crisis is the single biggest inhibitor to recovery. A reduced rate of VAT is a way of navigating through this crisis of increasing energy prices, war etc.
This is a sector to be proud of
The pandemic was the worst of times but brought out the best of qualities. The sector demonstrated dynamism, entrepreneurship, resilience and innovation. It adapted to feed the NHS and the homeless, turning pubs into village shops and becoming a community social hub. New tech is here to stay. Hospitality is at the heart of the community and there is much to be celebrated.
To find out more about any of the issues raised contact Leo Skinner
