We will all feel the squeeze, but squeeze too hard and tax receipts will dry up
Doom and gloom was the name of the game in the run-up to the Autumn Statement. Yet the measures delivered by the chancellor ended up being more positive for hospitality businesses than many had feared.
It was a pragmatic response to a turbulent economic market. Crucially, it delivered stability.
The one important part missing, however, was a long term economic plan for growth.
There are difficult decisions to be made in order to steer the country through these challenging times; that much was clear. But the role that businesses can play in driving economic growth should not be overlooked. At the despatch box, the chancellor recognised the importance of such a plan. Unfortunately, nothing meaningful was forthcoming.
Businesses create jobs, deliver higher wages and generate billions in revenue to fund vital public services. These are all key components of economic growth. But they can’t do that if they go out of business or have no margin to invest in people, wages and innovation, which is an all too real prospect for hundreds of hospitality venues across the country.
Our pubs, bars, restaurants, hotels, night clubs and coffee shops, to name a few, are fighting energy costs that have reached levels never seen before. They’re also grappling with enormous food and drink inflation, and are still finding it difficult to fill vacant roles. Throw in consumers tightening their spending, and it’s clear why hospitality businesses are struggling.
Despite all of this, Britain’s hospitality sector still has an enormous appetite to grow and build on our already world-class offering. Despite working in hospitality all my life, I’m still blown away by the passion I hear from the talented business leaders in our sector.
They want to invest. They’re desperate to innovate further, open more venues, and offer more fantastic experiences for the public.
At the moment, though, they are in limbo. They’re desperate for a clear plan from the government.
The chancellor talked about his growth priorities of energy, infrastructure and innovation. Hospitality businesses will be left scratching their heads about where they fit into this.
There was no steer on the labour market or how businesses will be able to recruit much-needed people to work in their venues. There was little on skills, training existing staff or bringing new people through. Reform of the apprenticeship levy would be music to the sector’s ears.
Businesses will be caught in the increasing squeeze we saw forecast yesterday. But the chancellor needs to be mindful. Squeeze too hard and the tax revenues they’re relying on to fund these priorities may dwindle.
Yet there was some positive news for hospitality businesses. UKHospitality has been warning about the looming £900m business rates bill that faced the sector, if current relief ended in April as expected and rates were hiked in line with inflation. Fortunately, the chancellor has heeded our warnings and has delivered for hospitality a freeze in the multiplier, no downward transition cap and extended relief.
This was a vital intervention, providing some certainty for businesses over the next 12 months. We now need to see the government deliver on its manifesto commitment to deliver root and branch reform of the business rates system. The current system is outdated and not fit-for-purpose, with hospitality overpaying by 300 per cent. The review should be part of a long-term economic growth plan. We need to understand the big picture thinking, so that businesses can see the way forward, feel some much-needed confidence and invest in the sector.
At the moment, that is the missing piece of the puzzle.