The trickle-down effect of the NLW will affect the whole supply chain, warns Rob Payne, chief executive of Best Western GB and Beacon
Tourism and hospitality are among the largest contributing industries to the UK economy; multibillion pound performers year after year. However, I think these sectors will be hardest hit by the National Living Wage (NLW), which could damage the image of British tourism worldwide. From a recent survey of the hotels we represent, 90% of them said they will have to increase their prices to mitigate the increase to their costs due to the NLW.
Our sister company Beacon helps our members with professional procurement, by securing global economies of scale in areas such as customer acquisition. My wider worry is for those SMEs that do not have the security of being part of a collective like ours. Those independent businesses - B&Bs, cafés, visitor attractions - that sit at the end of the supply chain with little room to manoeuvre and absorb additional costs.
The Office of Budget Responsibility (OBR) has predicted that 60,000 jobs would be lost as a result of the NLW and, while we are in favour of a fair wage for everyone, I think it will be the SMEs that will pay the highest price, with those job losses disproportionately distributed among our industry.
We are already seeing hotels and care home businesses in our portfolio that have been sold or are looking for buyers - and that's before the NLW has even come into effect. I see this as just the start of things to come, as suppliers start to pass on the costs through the goods and services sold to businesses. If the increases to NLW continue to the recommended amount of £9 per hour in 2020, this could seriously change the UK's hospitality industry.
It's not too late though. The economy is vastly different now to the buoyant one in which NLW was announced. It would be right for the OBR to look again at the 60,000 predicted job losses and I would call on them to do that.
With that in mind, I would also call on the Government to look again at ways in which it can help ease pressure on our industry come April. A reduction in tourism VAT to bring us in line with Europe and a reduction in the regulatory burden would be two popular and productive pledges.
The danger is that if the Government doesn't consider how to support the hospitality industry, it might unfairly penalise it over others. The only way the industry will be able to afford the NLW is through price rises and job losses, which will impact on the consumer and could, potentially, lead to some great businesses closing their doors.
It is morally right to introduce the NLW, and it is also morally right for the Government to look again at its disproportionate impact on our industry, before it's too late.
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