The sector has displayed amazing resilience since the pandemic, but is is now entering a new era where it can be a critical part of the nation’s recovery, providing employment, stronger communities, growth for the economy and restabilised public finances
As the 4 July election looms and this current parliament limps wearily to a close, it has earned the unenviable status of being the first in sixty years that leaves the average Briton worse off than when it started (2019). The combined impacts of our departure from the EU, a global pandemic, and a war in Ukraine have taken a heavy toll on our economy in the past five years.
Whomever forms the incoming government will need to be extraordinarily unlucky to see anything like the same economic headwinds as this one has. For the new Prime Minister a happy cocktail of falling inflation (allowing the Bank of England to lower interest rates), moderating energy prices, and Brexit impacts in the rear view mirror, allows the environment to be much more benign in the year ahead.
It will need to be. For Britain is in something of a fiscal hole. Like the current Tory government before them, both the Labour and Conservative parties have needed to commit to government debt falling as a proportion of GDP in the last two years of the new parliament, and are banking on a significant upwards kick in growth to pay for it. But this time we will really need to deliver the growth, as we will not be able to kick that particular can down the road forever. The consensus of economist’s forecasts for the next 5-years is for an average of around 1.5% growth per annum, and the Office of Budget Responsibility (OBR) is oddly more bullish at 1.8%. Were we to only achieve the average since 2008 (1.1%), this would create a further £60bn hole in the country’s finances.
Politically there is now a strong sense that we are running out options on the alternatives. Raising taxes above their current record levels looks suicidal. Making fundamental changes to government costs appear even more so, which means the time has come for the country to stare our low-growth economy in the face… and actually fix the issues.
There has been much discussion about the levers of change at the government’s disposal to drive GDP upwards. At the head of the queue is reform of the planning system, potentially with a less discretionary process, and a rethink of the green belts around our cities. And more incentives for businesses to invest (where current levels remain pitifully low compared to previous decades) are another likely early runner.
As the polls currently stand, Labour is a 1/16-ON bet to form a majority government in the next parliament. Rachel Reeves (the likely new Chancellor) has said “Labour will be the most pro-growth, pro-business Treasury the country has ever seen”. She surely will be seeking early wins at scale to underscore this.
At its annual summer conference (held on 13 June), UKHospitality called on all political parties to give their backing our sector – one that can grow at a significantly faster rate than the wider economy, while also providing new jobs and regenerating communities.
UKHospitality’s policy recommendations for an incoming government include: fixing business rates with a permanently reduced rate for hospitality and tourism; reforming the apprenticeship levy; planning reform to allow more hospitality-led regeneration of towns and cities; and reviewing and reforming VAT to bring it in line with European rivals.
Labour has already committed to replacing business rates and reforming the apprenticeship levy. The Conservative Party has committed to easing the burden of business rates on the sector and undertaking a review of the night-time economy.
As is so often the case Kate Nicholls (chief executive of UKHospitality) was perfectly in tune with the politics of the moment when she opened UKH’s Summer Conference with these words:
“Hospitality is a huge economic engine, with a turnover of £140bn and £54bn in taxes, funding vital public services. Make no mistake, we are working as hard as anyone to create the economic growth this country desperately needs. But our impact goes far beyond that. We make memories, and we make places. Places where people want to live, work and invest. Hospitality can be the difference between a thriving community and a failing one. The future can be even brighter. With the right investment and support, hospitality can grow by 6% each year. That’s six times higher than the wider economy. It would mean another half a million jobs. Jobs for everyone, everywhere. Our message to all political parties is simple – back us. Back hospitality. Back us to regenerate our towns and cities. Back us to invest in our people and create more jobs. Back us to serve Britain.”
As well as generating growth quickly and at scale, hospitality can also support the wider values that an incoming Labour government have expressed as important – those of increasing employment, building community, and improving citizen wellbeing.
Our sector has displayed amazing resilience since the pandemic, and so many businesses have emerged better and stronger as a result. But we are now entering a new era where we can be a critical part of our nation’s recovery – providing employment, stronger communities, returns for our investors and growth for the economy to restabilise our public finances.
So, I say well done to UKHospitality. As a sector it will serve us well to get behind them and our joint mission as much as we can – it is already paying dividends, but there can be so much more to come.
