‘Structural issues’ to blame for ‘neglected’ hospitality businesses closing

19-Mar-2019 - Last updated on 19-Mar-2019 at 10:18 GMT

Sectors overlooked: according to a new report, the Government is failing economic sectors such as hospitality

A Department for Business, Energy and Industrial Strategy (BEIS) report looking at five areas of the economy has claimed the Government is failing ‘everyday economy’ sectors like hospitality.

The report, which examines the Government’s development of its Industrial Strategy programme through sector deals with five areas of the economy – offshore wind, steel, construction, retail and hospitality – has found the Government has focused its efforts on high-tech sectors but has not done enough to engage industries such as hospitality.

It also welcomes the “overdue” establishment of the Industrial Strategy Council and recommends the council sets metrics and criteria of success for sector deals and publishes regular scrutiny of the process and deals agreed by Government.

Broad structural issues

The report states: “For hospitality, chains such as Byron, Jamie’s Italian and Prezzo had to close branches to survive, while pubs continue to close at a rate of around 18 per week.

“While closures are a natural part of the business life cycle, net closures in the retail and hospitality sectors have cumulatively totalled more than 3,000 in the past two years, suggesting structural issues rather than individual business models are primarily at fault.

“Among the reasons cited for the potential decline of both sectors are the rise of online retail, the level and disparity of business rates, and the wider challenges faced by the high street.”

Described as a ‘low productivity’ sector, the proposed deal for the hospitality sector outlined in the report focuses on employment and skills, including the need for greater investment in leadership skills to boost productivity.

According to the report: “The Government has committed to ‘work closely’ with the retail, hospitality and tourism sectors to deliver the foundations of productivity.

“We recommend that the Government now deliver on this promise and publish an action plan for how it is going to work with low productivity sectors to provide the productivity boost they so urgently need.

“BEIS should ensure that other Government departments, including the Department for Education and HM Treasury, are fully engaged in developing and delivering this plan.”

‘Neglected’ industries

“Sector deals won’t be enough on their own to tackle the UK’s productivity puzzle or insulate industry from the fallout of a no-deal Brexit or of greater friction in our future trade with the European Union,” according to chair of the BEIS committee Rachel Reeves MP.

“But sector deals are a key plank of the Government’s Industrial Strategy and, if agreed fairly and honoured fully, have the potential to make an important contribution to boosting the nation’s lagging productivity, improving competitiveness and delivering growth to all parts of the UK.

“The Government’s Industrial Strategy isn’t doing enough for the ‘everyday economy’, in sectors such as retail and hospitality where millions of Brits are employed.

“The Government’s ‘open door’ offer to industry isn’t being delivered upon in these neglected sectors and the Government needs to be much clearer about the criteria for sector deals and engage more actively and decisively to make these happen.

“On steel, the Government should get back to the table and talk to the industry to get a sector deal done.

“Having made the steel industry jump through hoops in efforts to get a deal, the Government should now deliver on its side of the bargain.”

Collaboration is key

Commenting on the report, UKHospitality chief executive Kate Nicholls, said: “The committee has rightly highlighted both the importance of the hospitality sector to the UK’s economy and the need for a nuanced approach to supporting it.

“Hospitality is crucial to our economy but is often not given the attention it merits. The sector is the UK’s third largest private employer, providing 9% of total UK jobs. The sector employs twice as many people as financial services in the UK and three times that of the oil and natural gas sectors. It is vital that hospitality is at the heart of the Government’s plans to encourage industrial growth, provide jobs and stimulate the economy.

“The Government has signalled its intention to support our sector, not least in agreeing in principle a sector deal for tourism and hospitality, but there is much more work to be done together.

“UKHospitality, its members and the wider sector are very happy to work collaboratively with the Government to ensure we get the right support and an effective sector deal.”

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