The General Election 2015: What the industry wants

24 April 2015
The General Election 2015: What the industry wants

According to a recent survey by Beacon Purchasing, 40 days ahead of the election, the £46b hospitality industry has made a reduction in tourism VAT the number one priority for the next government.

Other findings of the survey included strong support for a reduction in tax on alcohol (22%), which was announced as part of the Budget on 18 March with a penny coming off a pint, as well as a need for more support in plugging the skills gap and employing apprentices (25%).

But a reduction in tourism VAT was the clear leader, with 34% of businesses naming it the policy they most hope is put in place following the coming General Election.

Paul Connelly, director of operations at Beacon, said: "The companies surveyed represent the UK's fourth-largest sector and they deserve to be heard and taken seriously by the next government, which is why we commissioned the survey. And with fewer than 50 days to go, it appears that the sentiment is presently favouring the Conservative Party."

But what do individual operators and suppliers want to see from the next government? The Caterer asked individuals from the hotels, restaurants and pubs, foodservice and supply sectors to find out.

The publican/restaurateur
Peter Borg-Neal, chief executive, Oakman Inns and Restaurants

SME Funding
As with the wider economy, the real growth in jobs in our sector is driven by smaller companies. Any government that wants to see prolonged economic growth must ensure that SMEs have access to finance.

It does seem to me that the banks' balance sheets are in better shape than they were five years ago and, as a consequence, their appetite for lending is slowly returning. Furthermore, we have seen quite a lot of interesting developments that have increased choice and competition in the funding environment.

Within the banking sector, businesses such as Santander, Handelsbanken and Metro are emerging to provide genuine competition to the Big Four. Elsewhere, alternative forms of finance, such as crowdfunding, are making a genuine impact.

One thing that the Coalition Government did get very right over their term of office was to widen the scope of the Enterprise Investment Scheme and to relax the rules on venture capital trusts. The first of these literally saved my business at a time when my then bank was behaving appallingly, and has helped attract huge amounts of capital from private investors into our sector.

Going forward I would like to see the new government:

  • Further relax the restrictions on the Enterprise Investment Scheme - for example, allowing the maximum number of employees to be increased to 500 from the current 250 (they have already done this for "knowledge" industries, so why not all?).

Employment-related taxation
The Coalition Government has delivered progressive increases in the personal tax allowance, allowing everybody to pay less income tax, but being of particular benefit to people at the lower end of the national pay scales. I believe that this is the right approach for reducing income tax and is more sensible than attempting to reduce tax in the higher bands.

It has been encouraging that National Insurance has been removed for young people and for apprentices. This should be extended to everybody under 25 earning less than £20,000 per year.

I believe it would be a lunatic idea for the UK to leave the European Union. Our industry would be hit particularly hard as an exit would remove the supply of hardworking, ambitious people who are vital to our success.

Furthermore, it would remove thousands of people from the country who have led innovation and creativity in our industry - let's face it, without immigration, our dining scene would still look pretty bland.

Finally, people from the European Union represent a huge part of the customer base. They tend to be culturally appreciative of the pleasures of eating and drinking out.

Occupancy costs
There are clear signs across London that the cost of occupying a property is growing rapidly. This is being driven by competition for sites and is a worrying trend that will spread across the provinces. The Government is also looking at a review of business rates and I fear that the outcome of that will be that they go up.

Once occupancy costs rise as a percentage of turnover, the long-term viability of a site comes into question and businesses can be devastated in the long run, when a downturn in the economic cycle exacerbates the situation.

If we are to have vibrant high streets and rural communities, we need shops and leisure outlets to be able to compete with internet businesses and the ugly new build retail parks that are springing up everywhere.

Business rates are a particular irritant - they represent taxation without accountability and they can hit businesses in a disproportionate way because of the link to turnover.

I would like to see:

  • The end of upward-only clauses in leases.
  • A real-terms reduction in business rates.
  • A change in business rates that assesses profitability rather than turnover.

High-quality pubs and restaurants that serve quality, freshly prepared food have higher turnover and higher costs than more value lead concepts - who might have lower sales but the same profit. However, they employ more people and they tend to lift the quality of the retail environment. It is unfair that they are taxed disproportionately.

There is much debate about the impact on our sector from the current VAT rules. In France they have already cut VAT for the tourism industry. Efforts to win similar concessions in the UK have been seriously hampered by the fact that the industry does not seem to be able to agree a unified way forward.

I am crystal clear in my view:

  • I do not believe that any new government will agree to a VAT cut unless they can be guaranteed replacement tax revenue from another source.
  • I do not believe that any new government will support a reduction of VAT on alcohol sales.
  • The way forward is a reduction on VAT for diners to 5% and the introduction of 5% VAT on processed meals.

My central argument is that a supermarket can produce a ready-meal in a factory, package it up, transport it to a hub, then to a store and then retail it and apparently there is no value added. A restaurant or pub operator puts an apple on a plate and that attracts 20% VAT. That is clearly unfair and needs to change. If I had to pick one policy change, it would be this.

The hoteliers
Andrew McKenzie, managing director, the Vineyard at Stockcross

Perhaps I am a little cynical, but I don't imagine whoever ends up leading the county after the election will offer much solace to the put-upon hospitality industry. Be it Labour, Tory or the likely hybrid of a coalition - where one plus one equals one and a half (unless the SNP holds us to ransom, then it moves into minus territory) - I am not holding my breath for positive change. However, if the Vineyard Party won an outright majority and I was lording it in Number 10, it would be a different story.

The cost of doing business has increased enormously in the last decade. Environmental levies, increased bureaucracy, health and safety legislation (that doesn't make my guests or staff healthier or safer), increased legal and finance costs, all alongside flat revenue lines due to virtual price stagnation, have made for a difficult environment for our industry. To make the future a little rosier, I would suggest the following measures.

Take VAT for example. There has been a bullet-proof survey by the BHA proving that a cut in the VAT rate for hospitality businesses would result in more jobs and, ultimately, more money for the Exchequer. This works for most of our European competitors and would give us a fighting chance globally - a no-brainer in my manifesto.

Secondly, I would stop everyone jumping on the zero hours bandwagon. Every Tom, Dick and Harriet is churning out soundbites without understanding the situation. This age-old system has worked well for both parties in hospitality for years, offering two-way flexibility. We should stamp on exclusion clauses, which seem more prevalent in other industries, but generations of students would have been penniless without this setup and banqueting hotels bankrupt. Maybe if we started calling them casuals it would help.

Likewise the living wage; nobody can argue against this in principle - our industry has some of the hardest-working people in the country and they deserve to be better rewarded. I would love to pay my team more and could do so if I paid the government less - it's not like I am pocketing huge profits; every penny we make is ploughed back into our properties to keep them competitive. Business rates have become a huge burden over the years and some respite would allow businesses to flourish, employ more people and better reward them - simple really.

Growing revenues has got to be the answer to our business success and increasing our accessibility to emerging markets is essential. Putting us on an even playing field with our European competitors regarding visas would help. I would also act swiftly upon the findings of the Davies report on airport expansion due to be published after the General Election. My fear is a less courageous government may continue to procrastinate and further harm our global competitiveness.

Steve Cassidy, area vice-president UK & Ireland, Hilton Worldwide

The tourism and hospitality industry has been at the forefront of the UK's economic recovery since 2010. While other sectors have fallen behind, ours has grown - accounting for 9% of total GDP (£127b) and 3.1 million jobs (one in 10 of all jobs across the UK). As we approach the General Election in May with this record, I feel confident that our message about the important contribution the tourism and hospitality sector makes to the economic well-being of the country is starting to be heard by all parties.

Looking ahead to the next five years, our focus at Hilton Worldwide is to continue to create and support a diverse range of fulfilling career opportunities in our 100+ UK hotels. Like many sectors, hiring enough staff to meet growing demand remains a central issue and this is compounded by the well-documented shortfall in UK productivity. However, in tourism and hospitality there is a real risk that the skills gap and shortages will prove a major threat to the industry's expansion, and in turn our ability to create jobs and boost growth.

The challenge is greatest when recruiting for higher-skilled roles, with current forecasts suggesting that the hospitality and tourism sector will need to recruit 229,000 managerial and skilled positions by 2022. Chef shortages are particularly prevalent and of mounting concern for the industry. According to the latest figures from the UK Commission for Employment and Skills, 47% of chef vacancies are difficult to fill.

With these figures in mind, our priority is to build on the work undertaken in this Parliament to meet the sector's skills challenges. On apprenticeships, employers need control over their direction and funding, but not additional regulatory burdens. Moreover, we must keep apprenticeship standards robust but flexible, so training meets employers' needs. This has been the objective of the invaluable Trailblazers hospitality working group, which is launching new apprenticeship standards for hospitality and chef roles.

The first ever Tourism Council was established last summer and co-chaired by the ministers for skills and tourism and Simon Vincent, president, EMEA, Hilton Worldwide. Rightly, it focused its considerable efforts on the skills gap, tackling damaging negative perceptions about careers in our sector and how best to share the benefits of the sector through every region in the UK.

We call on all parties to commit to re-establishing the Tourism Council after the General Election so it can deliver its recommendations on improving skills, increasing the quality and quantity of jobs available, and boosting enterprise in the industry. After all, the benefits of this working partnership between industry and the Government in this Parliament will only be felt if their proposals are delivered in the next.

Above all, we must keep this momentum. We strongly hope that this direct line of communication between our industry and government remains open in the future, both to explore the broader skills agenda, but also to discuss other crucial issues such as visa reform or tourism VAT. There are few policy decisions that cross ministers' desks that do not (directly or indirectly) impact on our industry.

Our aim is to attract the best and the brightest talent to our industry and keep them. We look forward to working with the next government to help realise the sector's significant potential for future growth.

The foodservice operator
Alastair Storey, chairman of WSH

Attracting young people to the industry
We see young people as essential to the vibrancy and competitiveness of our industry. This is why we, like many other businesses, have invested heavily in attracting young talent to our organisations, as well as nurturing those already with us.

While business can do more to encourage young people to come to work in our sector once they've finished school, we believe that educating people about our industry can start much sooner.

We would encourage any new government to take a bigger-picture approach to the curriculum to see what they can do to communicate the message that our industry is a good career option. Academic programmes need to focus more on the hospitality sector. This can add real value to the country in the long term.

We work in a very meritocratic industry, which can be very rewarding. If one in 10 people in the UK work in the hospitality and tourism industry, let's get them thinking about their careers and options early on and prepare them for the potential path they wish to take. Getting children to better understand food and nutrition early on will not only help the future health of our nation, but it will drive the sector further forward in the long term.

The efforts of the industry to create more apprenticeships should be supported and recognised by any new government. During the challenging financial backdrop, many businesses in our sector provided alternative opportunities for young people to enter the workplace. Initiatives such as the BHA's Big Conversation and apprentice academies like the one we have recently launched in our business should be fully endorsed by the new administration.

Most responsible employers will naturally look to offer terms and conditions that will help to attract and retain talent. There is much discussion around what should be an entry-level wage, particularly in London where the cost of living is very high, driven to a large extent by accommodation costs.

The hospitality industry has really stepped up to the plate to create new jobs, and any proposed new pay rates need to be considered with the understanding that they should not be set at a level that leads to a reduction in jobs and growth. This would be detrimental to the industry and the economy as a whole.

Business rates
As with any new government, it is important to maintain balance and perspective to ensure people have the oxygen to be able to tackle core issues and priorities. Any tax incentives encouraging companies to invest can only be good for job creation and should be sustainably delivered.

The role of industry in the wider economy
During the recession and the following years of austerity, our industry played a major role in helping to get the UK economy back on track by introducing and developing many initiatives that created jobs and encouraged growth.

The new government will find a willing partner in our industry and should engage with us as we make up a significant part of the UK economy. The UK is a good climate to do business in, and we need to make sure it continues to be so, and ensure that our contribution is recognised. This industry has a lot of expertise it can offer to support the continued development of our economy.

What keeps you up at night?
Most entrepreneurs care passionately about their business and worry about doing a good job for their customers and team members. This will never change. Companies like ours are built on a desire to do well and, in our case, support the British economy.

Watching team members develop and grow is very important to me, which is why I would be supportive of any government measures that create a fiscal and social environment where businesses can flourish and make their vital contribution to the economy.

The supplier
Glenn Roberts, managing director, Gram UK

As May's General Election campaign reaches fever pitch, you can be sure of the main parties trying to score points on a wide variety of topics.

So far we've already seen that gaining the support of the wider business community has emerged as a key battleground. Personally, I firmly believe that any government has a key role to play in helping to narrow the widening skills gap that exists across the foodservice arena, as well as offering more far-reaching and meaningful incentives for purchasing energy-efficient and sustainable products for today's modern foodservice market.

As we leave the recession years further behind, and the foodservice market becomes more buoyant, priorities within our industry have shifted significantly. Where previously operators' main short-term concerns were simply to stay afloat through financially turbulent times, they can now consider longer-term goals and invest more thoughtfully in the future of their "financially tested" business models.

It is well documented that each party has very clear "green" and sustainability manifestos in place, from bold biodiversity plans to the ongoing decarbonisation of the electricity supply. There have even been mention of taking steps towards a zero-waste Britain, as well as plans to further support small and medium businesses looking to implement green initiatives.

As businesses face increasing pressure to reduce overheads and improve bottom lines, while also being required to demonstrate the implementation of greener business practices, it is vital that opportunities and incentives are offered to help businesses meet these requirements. According to the 2014 Gram Green Paper, 70% of respondents are unaware of governmental "green" legislation currently in place that affects their businesses. And 63% were reported to be unaware of government initiatives and tax breaks for running a greener business, such as the Enhanced Capital Allowance for purchasing energy-efficient equipment through the Energy Technology List, which is overseen by the Carbon Trust.

With the introduction of the new Ecodesign Directive in 2016, it is more important than ever that the government offers financial incentives for businesses. The new standards will have the potential to be a complete "landscape changer" in this product sector. There is potential that a fifth of all products that are currently sold
in the European marketplace could be removed from the supply chain, as they will not meet the proposed Minimum Energy Performance (MEP) standards. The new energy labelling will also help operators to clarify the purchasing process, which will initially start with an A to G scale. Thanks to this, the introduction of MEP standards will enable end-users to easily identify, compare and contrast the energy consumption of the products available to the market.

We also need to consider the long-term future of the foodservice industry and we need more businesses to operate more sustainably to help ensure the longevity of this multimillion-pound industry, which is a major employer and strong contributor to the overall economy.

Despite Gram's 2014 Green Paper highlighting that progress that has been made within the foodservice industry, with 83% of the operators surveyed considering themselves to be "green", a large percentage of the industry has a limited understanding of how best to implement such practices. Regardless of the winning party, it would be great to see an increase in incentives for buying energy-efficient equipment. This will obviously benefit the environment, but also help support the industry throughout the supply chain, as well as lower operators' energy bills.

It's been a few years of increasing disillusionment with the establishment, but the one thing we should all agree on is taking the right next step to help the industry meet the coming challenges. Doing better, more sustainable business with clear, understandable incentives must be a cornerstone of that approach.

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