UKHospitality: 'Let's keep the industry's doors open'
When the cost of running a business is prohibitive, UKHospitality deputy chief executive Allen Simpsons asks why the government is intent on making things even more difficult.
You'd have to work hard to find someone who doesn't think protecting high streets and village centres matters. No one likes to see the doors on their favourite pub shut, and we all get a bit excited when we can see a new restaurant getting ready to open. Hospitality makes communities.
I've always assumed that's true of politicians too. But sometimes it's hard to be sure. Certainly, the costs of running a neighbourhood business seem to be getting worse. We are now in a strange situation where the tax system encourages you to open up in a warehouse or in an out-of-town retail park, not in the heart of a community.
But let's give politicians the benefit of the doubt. Some changes in the economy have come swiftly – 20 years ago no one could have predicted the impact of online shopping, for instance – but it's time to catch up. We've simply got to equalise the costs for community businesses like hospitality.
That's why the budget hangover that hit our industry on 1 April is so frustrating. The cost of running the country's hospitality sector went up by an astonishing £3.4b in the time it took to pull the shutters up. Business rates alone have been raised by more than twice the rate of inflation.
Hospitality pays significantly more in business rates as a proportion of turnover than any other sector. Here's a mad fact – we pay three times the amount real estate businesses do, and significantly more than financial institutions do. It means growth is at risk. Hospitality is expected to grow by 6% a year, far more than the rest of the economy, but as much as two-thirds of our sector's annual investment will have to go towards day-to-day running costs. Can the economy really afford to put the brakes on growth like that?
The increase in minimum wage is a big part of those raised costs, and of course no-one knows more than hospitality how much it matters to give people well-paid jobs. Employers support the minimum wage.
But it's a simple equation. We can and must pay our people well and invest in their training. We have to turn profits to keep the doors open and invest in growth. But that means the other costs have to come down. Business rates have to be sorted. We were very pleased to see the Labour Party promise a proper review, and we hope we can start to see political consensus that the tax system should encourage community businesses, not make them uncompetitive.
The rate of VAT for hospitality should be reduced so it's competitive with the rest of Europe. We are in a race for the £25b tourist spend every year – in fact, hospitality is the second-largest services exporter the UK has. Let's stop discouraging visitors to spend their money in British restaurants by taxing them more than elsewhere.
And finally, the government can help with that wage bill by reducing employer National Insurance contributions for the sector, just for long enough for businesses to absorb the change.
Hospitality is unique. It builds communities and it creates places where people want to live, work and invest. Every day, hospitality is serving Britain. We just need a little bit of help.
Allen Simpson is deputy chief executive of UKHospitality
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