Economy grows when sector 'fires on all cylinders'

12-Oct-2022 - Last updated on 12-Oct-2022 at 10:15 GMT

Firing on all cylinders: fall in GDP shows when hospitality sector thrives the economy grows says UKH chief executive Kate Nicholls (Credit: Getty/Colin Anderson Productions pty ltd)

Shrinking GDP shows when the hospitality sector “fires on all cylinders” the economy grows, UKHospitality (UKH) chief executive Kate Nicholls has stated.

This comes as figures released today (Wednesday 12 October) by the Office For National Statistics (ONS) revealed the economy shrank by 0.3% in August, with consumer facing services, which includes hospitality, one of the largest contributors to the decrease.

Furthermore, Gross Domestic Product (GDP) was estimated to have fallen by 0.3% in August 2022 following growth of 0.1% in July, revised down from a previously reported 0.2% growth.

In a social media post on Twitter today, Nicholls said: “Fall in GDP attributed in part to slowdown in consumer facing industries with slower growth in hospitality. Reinforces the fact that when hospitality fires on all cylinders the economy grows.”

Stifling growth

Fall in GDP attributed in part to slow down in consumer facing industries with slower growth in hospitality. Reinforces the fact that when hospitality fires on all cylinders the economy grows https://t.co/kVDVS8f4eo
— Kate Nicholls OBE (@UKHospKate) October 12, 2022

This follows a continued slowing in the underlying three-month on three-month growth, where GDP also fell by 0.3% in the three months to August compared with the three months to May, according to ONS.

Consumer facing services fell by 1.8% in August, after growth of 0.7% in July, revised up from growth of 0.6% in ONS’ previous publication, with accommodation and foodservice activities decreasing by 0.6%.

Additionally, arts, entertainment and recreation activities fell by 5%.

This comes as figures released by ONS yesterday (Tuesday 11 October) revealed the UK’s employment rate between June and August 2022 was 75.5% lower than previous quarter, which Nicholls stated was “stifling” the sector’s, which is the third largest private sector employer in the UK and represents 5% of GDP, ability to drive growth.

Furthermore, recent data from Barclaycard showed consumer card spending in restaurants fell 12.2 % in September, while bars, pubs and clubs slipped into the red for the first time since March 2021 with a 0.4% decrease, as 53% of Brits stated they planned to spend more time at home to combat rising energy costs this Winter.

Tightening purse strings

The Society of Independent Brewers (SIBA) head of comms Neil Walker said the key for pubs in navigating growing consumer fears was ensuring quality across the board, especially if the UK does enter recession.

He said: “Worries over increased mortgage repayment costs, energy prices and other cost of living rises have a direct effect on consumer spending as people look to tighten the purse strings and cut down on spending.

“The key for pubs will be ensuring they offer a great range of local cask beers, quality drinks across the board and a welcoming environment.

“If the UK does move into a recession, we know that people tend to opt for higher quality products as they seek to purchase less often, by sourcing beers from local independent breweries you give people a reason to visit their local pub rather than drink at home.”