She highlighted the upcoming cost hikes that are set to hit the sector from April, just after the Chancellor is set to announce the Spring Statement.
Nicholls said: “Everybody knows the headwinds that we’re staring into in April. We’ve got significant challenges coming through as the result of the Budget – NICs, national living wage, business rates changes – particularly impacting on pubs and independent businesses.
“All of that is adding up to £3.4bn of additional tax the sector is going to have to digest when it comes to April.
“While the Government is listening and hearing, they’re not able to act or they’re not feeling that they want to be able to act given the state of the public finances so [it’s] a hugely challenging environment we’re facing into.”
“What we’re doing at the moment is therefore trying to work with the Government up until the Spring Statement [on Wednesday 26 March],” Nicholls added.
“Now, just as an expectation management this is a Spring Statement, it’s not a Spring Budget. It isn’t an interventionist measure, it’s not a time when you would look to see tax cuts and tax breaks, it’s an update on the economic circumstances.
“We’re not expecting that to have big tax changes or tax policy coming through but we are continuing to push to see if we can get that NIC threshold reduction postponed for a year, reversed and see if we can get the business rates relief brought forward more quickly so we can have businesses supported.
“Failing that, looking at other areas the Government could work with us on to be able to make sure we have a supportive fiscal and regulatory environment for the businesses to be able to go through.
“That we have some kind of breathing space into the P&L for the course of this year and trying to make sure they understand the challenges we’ve got in managing that process.”
The UKH boss outlined three key areas the trade body was working with the Government on.
She said: “There is going to be a hospitality in high streets strategy published, which is going to be looking at how you get investment back into the high streets and how do you unlock growth in hospitality.
“There’s a visitor economy strategy that’s looking at how do you get more international visitors coming through and domestic holiday makers staying in the UK spending in our pubs, bars and restaurants.
“They are going to be looking at an investment and an industrial strategy, which again is looking at, how do you use support those businesses that are seen as core to the infrastructure of UK PLC of which pubs, bars, restaurants are a key one as far as the government is concerned, how do you support them?”
Nicholls also said the organisation was highlighting the impact of last year’s Budget on the sector, emphasising how those fiscal decisions made things worse and asking how the Government can support businesses, particularly this year.
She added: “What you’ve got is a really schizophrenic Government here. The business secretary talks about high streets of being a second priority growth and all of them say hospitality is key to delivering those objectives.
“The disconnect comes from the Government not realising they need to do something proactively to help us. They can’t just sit back and let us be struggling and they can’t just sit back and expect us to be able to deliver in the way we possibly did in 2008/2009, recovering from the financial crash where we were able to step in and generate those jobs, growth and investment.
“They do see it, there is a golden thread running through everything they say in that industrial strategy.
“We underpin the development of the eight growth areas, which are in clusters. You need investment in broader places. There’s a recognition of the need to get people off welfare, into work and hospitality being a key route through to that.”
According to Nicholls, there’s a desire to support coastal communities and areas of rural deprivation and it is hospitality businesses that are rooted in their communities, particularly pubs that are going to be able to deliver that.
“But there seems to be a failure to realise that effectively, you’ve got an industry that is bleeding out as a result of the Budget change and is not going to be able to support and sustain itself, let alone deliver Government objectives,” she added.
“That’s the thing we need to keep reinforcing to the Government as we go further forward. If you want investment in people, places that people want to invest in, people want to [invest] in those high growth sectors of the economy, you need a hospitality infrastructure to create those great places that people want to live, work, visit, it doesn’t happen by accident.
“At the moment, we know they’re hearing that message, they just don’t seem able to take the next step and do something to deliver and against those priority areas.”
Nicholls wasn’t optimistic about any significant changes from the Government.
She said: “I don’t think anything is going to compensate for the costs of NICs nor do I think there’s much light at the end of the tunnel that will see some big changes in policy.”
However, Nicholls did highlight how these sector can look forward to business rates reform next year.
She said: “Root and branch reform of business rates is what we’ve been promised. There’s a down payment on that with permanent lower multipliers, set at a premises level going forward, but there’s a lot of pain to get through before that, in terms of business rate relief going.
“However, that does mean that permanent lower model will be in place for three to five years so we can have some certainty.”
Furthermore, she talked about reform of the apprenticeship levy, which will mean some money will be flowing back into the training businesses need.
Both the apprenticeship levy and the Government-backed hospitality Sector-based Work Academy Programmes (SWAPs), the latter of which was announced in February, were highlighted by the trade body boss.
“The apprenticeship living and SWAPs policy [are] really key because if you employ people who were on basic apprenticeships, foundational apprenticeships, or higher level, they don’t pay NIC so that is one way of helping to pay down that NIC policy and we’re looking at widening that,” she added.
However, with the upcoming cost hikes estimated to total £3.4bn, according to UKH, it doesn’t appear the Government is looking to do anything to meet those increases, Nicholls said.
She also outlined how the Employment Rights Bill, which was first introduced in parliament in October, could impact the sector.
Previously, employment law specialists advised the pub sector to review their practices so they would be ready to implement changes when the bill comes into force.
Sarah Skeen, partner in the employment team at law firm TLT, previously warned it was “likely to have major ramifications for those in the pub sector”.
At the MA Leaders conference, Nicholls said: “The Employment Rights Bill is going through at the moment. That is just a framework bill so it has very little detail in it, but it does talk about changes.
“Fundamental changes day one rights for employment legislation would be around sick pay, unfair dismissal being changed, and particularly in our sector, zero hours contracts - a requirement to give notice of rotas and staff shifts patterns and compensation where those are cancelled.
“There isn’t any detail to flesh out any of those and the zero hours contract element, although it started out as being a ban on zero hours contracts, we’ve worked really hard to make sure that’s not the case.
“They will be retained, they will be available to workers and they’re crucially only apply if people are working regular hours during a 12-week reference period, that’s being talked about. We have got back into a better space.
“Similarly on unfair dismissal, it isn’t really, really day one, nine months is what they’re talking about so that will see the unfair dismissal threshold drop from 24 to nine months so people would be allowed to make people redundant in that period, there will be a light touch process for redundancies.”
She said UKH was focusing on areas that would impact operators from a financial point of view.
Nicholls added: “That is principally around compensation for shifts. We want that to be just where it is cancelled and very last minute, not whether it’s an agreement from the worker and the employer that they can change shifts or between employees that they change shifts.
“The second one is around sick pay. At the moment, the proposal is, it will be statutory sick pay from day one and the suggestion is it would be at 80% so we need to try and make sure that changes around that.
“Third and most important one is around that pledge, that manifesto pledge of a real living wage for all.
“At the moment, we have got that pegged back to just being a living wage or the living wage for all which is 18 plus.
“It isn’t coming in for 16 to 18 year olds, it isn’t coming in for those on apprenticeship rates but crucially making sure it’s over time and at the limit of the low pay commission is set now, to make sure it’s smoothed out so that it takes account of the impact and employment, it takes account of economic circumstances and growth and that we have that better appreciation of the costs to the businesses of that going through.”
Smoothing those out is “critical”, Nicholls said. She also laid out how the implementation date had been pushed back to the end of 2026, early 2027 and how UKH is trying to ensure flexibility is in place so when the bill does come into force, it won’t mean a great deal of change for operators.
Looking at the rising costs that are set to hit the industry from April, Nicholls outlined the impact this could have on pub closures and job losses.
She said: “We have to be quite cautious around this because there’s so many uncertainties, so it could be a very wide ranging band.What we’re seeing, when we asked businesses, all sizes of businesses, small, medium large, across all parts of hospitality, we worked in partnership with BII and BBPA as well as Hospitality Ulster to gather the details, is predictions do vary quite widely.
“We’re seeing around two-thirds of businesses saying they are going to cut staff hours and cut head count. [Some] 85% of them saying they are going to freeze investments so you’re not going to see new openings and that will see net closure figures tip up.
“You’re also seeing a third of businesses saying they are going to restrict their trading hours.
“The final element of it was across the whole of the sector, a third of businesses are operating at or below break even and 25% now have no cash reserves. Those are the ones that are in the most vulnerable category because they are most likely to suffer as a result of economic shock.”
“The uncertainty around this is what happens with broader consumer confidence, consumer spending, permission to spend and what happiness to the top line, as to whether some of those businesses can trade their way through with a freeze-on investment, passing on elements to do with price and adjusting hours and offering.
“Looking at the worst case scenarios that we could be seeing as many venues across hospitality close as we did during some of the peak Covid years, that would be looking at around 3,000 to 5,000 net closures across hospitality as a whole.
“We had high vulnerability there from restaurants, nightclubs and late-night bars and those are the ones that particularly haven’t recovered as well from Covid and are therefore more vulnerable to some of those patterns, so it won’t just be our pubs unfortunately, that we see.
“Some of that will be driven by new openings, where we see high levels of closure and business failure and insolvencies, that is sometimes offset by new openings and businesses coming in to take advantage of business failures, to take on new sites to merge and consolidate, we are going to see that across the industry too.
“We will see CVAs coming through and we’ll see mergers and acquisitions, people pick up packages of pubs so that might be a business failure [but] won’t necessarily translate through to site level closures.”
However, the trade body boss was optimistic about the future for the sector.
“There are positives. The visitor economy strategy the Government is working on is trying to get 50m visitors a year - that’s up 10m,” she said.
“They will have to do something to drive that demand. We know our international visitors coming through albeit, they do go disproportionately to towns and cities and certain clusters, but they do spend more.“
“They are 10 times higher spending than a domestic overnight so that’s a positive if the Government is focused on getting more people into the country.”
Furthermore, Nicholls highlight how consumers are still keep to spend discretionary income in the hospitality sector.
She added: “The second positive is that if customers get permission to spend, it’s not just about confidence now, it’s a positive signal from the Government there is permission to spend, that we are through some of the worst, all the metrics are positive.
“We did a recent sentiment survey with CGA, [which found] 79% of customers say if they have any disposable income, the first place they will spend it is eating and drinking out and socialising with family and friends.
“The positive sentiment is there, it’s being held back at the moment by a lack of confidence and people don’t have that permission to spend. If we can change that narrative then I’m confident we will get people coming out.
“The same survey we do with CGA also looks at weekly and monthly trackers. While they have flatlined a little bit and while it is clear people are spending the same or going out less frequently, but you are still seeing a positive trend. You’ve still got 47% of people coming out at least weekly and 97% coming out at least monthly.
“We have carried forward that positive halo effect of Covid that people want to socialise with family and friends in pubs, in bars, in restaurants.
“Discretionary income is increasing because people are seeing real-time increases in wages. Once they feel the negative sentiment is gone and fingers crossed if you get a good start to the season with some fine weather, I’m sure we will start to see people coming back and that will help us to rebuild.”
“The final positive is despite all the appearances to the contrary, the Government does still look to us for some of the big solutions to their problems, growth, 80% employment and regeneration of the high street so we’ve got to hold their feet to the fire and get them to deliver things that will help us to do that.”