New Report Says UK Restaurant Industry Could Be Headed for a Crash

“The growth outlook of the [hospitality] industry is uncertain, given the pressures of the National Living Wage, increases in business rates, and the potential availability of labour following the UK’s exit from the EU.”

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04 July 2017, 4:37pm

Photo via Flickr user Concept 2 Model D

The UK hospitality industry has had a rough time of late. Brexit-related cost increases have forced some restaurants to close and concern over the future rights of EU citizens has deterred new culinary talent from moving to the UK and left kitchens unsure of how to fill job gaps. Today, a new report published by Ignite Economics suggests that even more bad news could be on the way.

Commissioned by the British Hospitality Association (BHA), the paper opens by stating that hospitality and tourism is the UK's fourth largest industry, with its contributions to the economy growing faster than any other since the 2008 financial crisis. But that's about where the good news stops. The report goes on to show that this growth could slow down dramatically in the next four years.

In a worst case scenario, Ignite predict that the number of people employed in hospitality could fall by 1 percent—equivalent to more than 32,000 jobs in an industry that currently accounts for 10 percent of the UK job market. The report lays the blame for these predicted job losses on "the pressures of the National Living Wage, increases in business rates, and the potential availability of labour following the UK's exit from the EU, amongst other things."

MUNCHIES reached out to the BHA and asked how such a huge decline in restaurant employment could be avoided. Ufi Ibrahim, the BHA's chief executive, provided a press statement: "We need the Government to step up and support our industry by reducing tourism VAT, working with us to reduce the dependence on EU workers and increase the number of UK workers joining the hospitality industry, allowing the Low Pay Commission to set the National Living Wage, and to bring forward a fundamental review of business rates."

Ibrahim added: "[Hospitality is] the front door to the UK and are fundamental to ensuring the UK remains open for business."

It's worth noting, though, that the worst case scenario calculated by Ignite assumes that the 65,000 hospitality jobs currently held by EU workers are left vacant and labour productivity stays at 2016 levels. With think tanks, Government committees, and companies all working to find a way to allow EU citizens to work in the British hospitality industry, these predicted job losses may not come true.

Either way, many in the industry agree that implementing the National Living Wage and business rate hikes have hit restaurant and bar profit margins hard. MUNCHIES reached out the Treasury to ask how the Government would be prepared to support the hospitality sector in the face of this.

A spokesperson told us: "The Government keeps all taxes under review and is open to receiving fresh evidence from industry and key stakeholders in favour of a reduced rate of VAT on tourism-related industry in all parts of the UK. The target for the National Living Wage is set relative to median earnings to reflect wider economic conditions, and we've asked the independent Low Pay Commission to recommend the path to the target level of 60 percent of median earnings in 2020, taking into account the state of the economy and the labour market."

They continued: "The Government is working closely with the hospitality sector to understand the impact on the workforce of exiting the European Union and to develop practical solutions together. Budget 2017 announced a £435 million support package, including £110 million support for small businesses and £300 million for local authorities to support ratepayers facing the most difficult increases in bills."

Business rates and VAT don't make for the most scintillating pub conversation, but they could soon decide whether your bartender still has a job.