Hospitality Industry

Tuesday 24th January 2023 Lords Chamber

Question

14:57

Asked by

[Baroness Twycross]

To ask His Majesty’s Government what assessment they have made of the impact of the current economic situation on the hospitality industry.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, officials at the Department for Business, Energy and Industrial Strategy use a range of data sources, including the ONS, Statista and IBISWorld, to assess the impact of the current economic situation on hospitality businesses. In addition, Ministers and officials work closely with hospitality businesses and the main trade bodies, including UKHospitality, the British Beer and Pub Association, and the British Institute of Innkeeping, which provide us with valuable data on levels of trading and economic performance.

[Baroness Twycross (Lab)]

My Lords, the cost of living crisis is causing hardship not only to individuals and families but to the businesses that employ millions of people in the UK hospitality sector. Many of those businesses are on the brink of closure, not least due to food inflation and spiralling energy costs. Will the Government reverse their decision to reduce support for the sector in relation to energy bills and retain a permanent lower rate of 12.5% VAT? Will the Government also commit to updating their hospitality strategy, published in 2021, to ensure that the sector can meet the challenges that it now faces?

[Lord Callanan (Con)]

The noble Baroness makes a good point. We will certainly keep the hospitality strategy under review. It is worth recognising that we have offered considerable support to the sector, as we have to all businesses. I am afraid that we cannot continue to provide such levels of support. Nevertheless, support is available through business rates relief and other policies, and we continue to liaise closely with the sector.

[Viscount Hailsham (Con)]

My Lords, would it not be helpful to make an assessment of the impact on the livelihood of those who work in the hospitality sector of the damage caused by the strikes on the railways?

[Lord Callanan (Con)]

My noble friend makes an important point. The sector estimates that the railway strikes have cost it over £1 billion in lost revenue during the strike period, so they do have a significant impact.

[The Earl of Clancarty (CB)]

My Lords, it is a mystery to most people why, if oil and gas prices are coming down, energy bills are still high. For hospitality and arts venues, these bills have increased massively in the last year. Is the Minister aware that, according to the Night Time Industries Association, for most of 2022 one venue closed every two days? The Government should, and can, do much more to help, particularly considering that some energy companies are making huge profits.

[Lord Callanan (Con)]

That depends on what the noble Earl defines as an energy company. Many of the energy retailers are making very little money—in fact, they are losing money. Nevertheless, the noble Earl makes an important point. We want to make sure that there is no price gouging going on. We are in regular contact with Ofgem officials, and I have met with them. One of my ministerial colleagues has met with the energy supply companies to make sure that they are also doing all they can to support these vulnerable businesses.

[Lord Wigley (PC)]

My Lords, does the Minister appreciate that one of the significant problems facing the hospitality industry has been the shortage of labour, a direct result of the Brexit of which he was such an enthusiastic supporter? What will the Government do to enable the hospitality industry to get suitable labour for the next season?

[Lord Callanan (Con)]

I am not sure that I would equate the two issues, but I am happy to debate this with the noble Lord some other time. There are some labour shortages in the hospitality sector, as there are in others. We want to get the message across that industry needs to invest in workers from this country, rather than relying just on immigration all the time.

[Lord Addington (LD)]

My Lords, following up on that last question, would the Minister like to decide in the short term where he will get his workers from? If the industry contracts, there will be nowhere for them to go and we will all lose. Could he comment on that?

[Lord Callanan (Con)]

It is not necessarily the case that the industry is contracting: this year, revenues were ahead of where they were before the pandemic. There are some businesses closing and others are opening, and employment is up since before the pandemic.

[Lord Kamall (Con)]

My Lords, a few noble Lords have referred to the impact of Brexit. Can my noble friend the Minister assure us that, when it comes to future immigration policy, whether for the hospitality sector or others, we look not only to white Europe but to non-white, non-Europe, to make sure that we no longer have a racist immigration policy?

[Lord Callanan (Con)]

My noble friend makes an important point. We need to have a fair and balanced immigration policy, treating all parts of the world equally.

[Lord Woodley (Lab)]

My Lords, I declare an interest, in that many thousands of workers in the hospitality industry are members of my union, Unite. As the Minister knows, new figures show that one in seven jobs in this sector are now completely unfilled. It is impeding businesses dramatically, to the tune of 16% of their revenues, and reducing productivity and potential profits—profits are falling by the wayside. Does the Minister therefore support the industry’s call to lower visa requirements, as other noble Lords have mentioned before, to help address the chronic staff shortages, reduce VAT to 10% for 12 months, as has been mentioned, and continue the energy support for at least the next 12 months.

[Lord Callanan (Con)]

I know that the Home Office keeps all visa policies under review. If the noble Lord will forgive me, I will leave the setting of VAT to the Chancellor, but I am sure he has heard the call that the noble Lord has made.

[Baroness McIntosh of Pickering (Con)]

My Lords, will my noble friend look favourably on keeping the alcohol duties at their current levels while the hospitality industry continues to suffer due to the crisis we are currently experiencing?

[Lord Callanan (Con)]

Again, I know that the Chancellor keeps alcohol duty levels under constant review. I am sure that I am the same as all other noble Lords, who would love to see them reduced, but if you raise this with the Treasury, it will say that it has lots of demands for tax and duty reductions and not many people offering to increase others to make up for them.

[Baroness Blake of Leeds (Lab)]

My Lords, can we stress the scale and extent of the problem that we are discussing right now? Last month, 320 food services were forced to initiate corporate insolvency procedures, 41% more than in the same month in 2019, pre-Covid. Overall, in 2022, the hospitality sector contracted by 5%, with almost 5,000 venues closing, nine out of 10 of which were independent. This is incredibly damaging, not only to the wider economy, as well as the communities they serve, but particularly to all those who have lost their livelihoods. What urgent steps are the Government taking to help this vital sector recover and rebuild?

[Lord Callanan (Con)]

The noble Baroness makes an important point. Any business going under is regrettable and a tragedy for all those involved, but we must not exaggerate the problem. Following sharp decline throughout the Covid-19 pandemic, output has now recovered in the hospitality sector. In December 2022, it was about 8.5% above 2019 levels. We are continuing to offer support to the sector with energy bills and business rates relief.

[Baroness Doocey (LD)]

My Lords, will the Government prioritise the expansion of the youth mobility scheme visa to our European neighbours? This would help enormously with the huge number of vacancies in the tourism sector, and it would also provide opportunities for British businesses in Europe.

[Lord Callanan (Con)]

As I said in reply to an earlier question, the Home Office keeps visa policies under constant review. Where there are demonstrable shortages of labour in certain sectors, I am sure that the Home Secretary and other Ministers will want to look closely at them.

[Baroness Wheatcroft (CB)]

My Lords, one of the problems affecting the tourism industry is the lack of tax-free shopping. We are sending people to France and Italy when they should be coming here, at a time when our hotels and hospitality industry need that business. Will the Minister commit to reconsidering that policy and looking at the effects of it?

[Lord Callanan (Con)]

Again, noble Lords are tempting me to go down the path of Treasury policy. I know that the Chancellor has heard many of the representations that were made to him about tax-free shopping. If he has anything to announce, I am sure we will hear about it in the Budget.

[Baroness Foster of Oxton (Con)]

My Lords, does the Minister agree that although the unemployment figures are low, which is a good sign, there are still 1.5 million people who are claiming unemployment benefit. What can the Government do to really ensure that every effort is being made to get these people back to work?

[Lord Callanan (Con)]

My noble friend makes an important point, and it links in well with some of the other questions that we considered. Before we reach for the easy solution of immigration, we want to make sure that all opportunities are offered to people who are already in this country and that those who are unemployed and claiming benefits can get back into work. That would be a great thing, and we will do all we can to assist that process.

[Lord Harris of Haringey (Lab)]

My Lords, the Minister answered the first Question by telling us about all the sources of economic information that his department collected on the hospitality industry. Subsequently, he has told us that he is concerned about the economic costs, and he quoted a precise figure of the costs of the transport disputes on the hospitality sector. What is his department’s assessment—plus or minus—of the economic effects of leaving the European Union?

[Lord Callanan (Con)]

The figure I quoted was based on anecdotal evidence that was given to us, but there are lots of different figures flying around for all sorts of different impacts. The biggest impact, of course, was from the Covid pandemic, and clearly energy price rises have had an impact. We keep all of these matters under review.