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Hospitality sector expected to lag in post-Covid recovery

19 January 2021 by
St Christopher's Place, London

The hospitality sector is expected to take longer than most to recover the jobs lost in 2020, according to EY's latest Regional Economic Forecast.

It is also anticipated that it will employ substantially fewer people in 2023 than it did in 2019.

Employment in the hospitality sector is forecast to fall by the equivalent of an annual average of -1.39% by 2023 compared with 2019.

When measured by Gross Value Added (GVA), the hospitality sector is also forecast to be smaller in 2023 than it was in 2019 and is expected to see the equivalent of an annual average -1.36% decline.

Only the mining (-3.05%) and manufacturing (-1.83%) sectors are expected to see larger shortfalls relative to their 2019 sizes. By comparison, the total UK economy is forecast to grow by the equivalent of 0.14% annually.

Christian Mole, EY's UK and Ireland head of hospitality and leisure, said: "There is no doubt that hospitality is one of the sectors most adversely affected by the Covid-19 pandemic. Social distancing and lockdown measures significantly affected trading levels, adding to pre-existing challenges facing branded restaurants in particular, including over-supply and unsustainable rents.

"Pubs and hotels, in contrast, entered 2020 in robust health, but have faced disruption to the critical pre-Christmas period, with wet-led pubs and bars particularly exposed."

The forecast also suggested the sector will see regional inequalities, with the largest declines in employment found in the south west (-1.83% per year between 2019-23) and the west Midlands (-1.71%). The regions likely to see the lowest declines in employment are London (-0.97%) and the South East (-1.07%).

The GVA measure showed a similar pattern, with the south west hospitality sector declining by -1.86% and the west Midlands by -1.73%, compared with London by -1% and the south east by -1.10%.

Mole added: "In contrast to previous downturns, London has been one of the most affected cities in the UK, reflecting the pandemic's impact on international tourism and business travel. But in the longer-term, we expect London to recover to pre-Covid levels of activity.

"The pandemic has resulted in many businesses having to significantly restructure their cost base. With payroll the biggest single cost for most businesses, this may mean some will face tough decisions around their longer-term headcount."

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