Hospitality Industry: Government Support

Graham Stringer Excerpts

Monday 11th January 2021 Westminster Hall

[Graham Stringer (in the Chair)]

I remind Members that there have been at least two sets of changes since we moved back into Westminster Hall. I will try to clarify them so that people are not confused about the procedure that is there to ensure social distancing and keep Members safe.

Members who have not arrived at the start of the debate will not be allowed to intervene or speak. Members are expected to respect the one-way system. Members should also sanitise their microphones using the cleaning materials that are provided before they use them and afterwards. Members speaking in the latter stages of the debate should use the seats in the Public Gallery if there are not enough seats in the horseshoe. Although Members are expected to stay till the end, if there simply is not enough room, it might be helpful if people leave for that purpose. Finally, Mr Speaker has asked that people wear facemasks in the main Chamber, and I think it would be sensible if Members do that in this Chamber when not speaking, to be consistent with the main Chamber.

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[Catherine McKinnell]

The hon. Gentleman makes an interesting point; perhaps the Minister will comment on that in his response.

This is a timely debate, because although many businesses have taken a significant hit since March, hospitality, which thrives on social mixing and travel, has been crippled by repeated lockdowns and the risks posed by the virus. Local economies with a higher proportion of workers employed in such sectors have been disproportionately hit.

Many restaurants have pivoted to providing cook-at-home and takeaway offers with contact-free delivery or kerbside collection. In these strange times, Geordies can enjoy takeaways from all manner of venues across our city, from the Thyme Square café on Station Road, with its carry-out Sunday lunches, to the cook-at-home offerings from 21 and the Michelin-starred House of Tides on the quayside. None the less, the situation remains incredibly challenging for all. A recent UKHospitality study found that 41% of businesses in the sector thought that they would fail by mid-2021, and one in five thought that they would have enough cash flow to survive beyond February.

Even when restrictions were relaxed over the summer, most people could still go to restaurants or pubs only with the people they lived or bubbled with. The simultaneous closure of sports stadiums, cinemas, music venues and theatres has a knock-on impact. If the business of people catching up with family and friends over drinks, going on dates, or having a bite to eat after a match or film is lost, that is a huge chunk of revenue. Hospitality also lost out badly from the drop in tourist spend this winter. Other parts of the hospitality sector, such as nightclubs, have remained closed since the first lockdown in March. From the reaction to the recent debate on the night-time economy, I know that Newcastle’s iconic nightlife is sorely missed by visitors and locals alike.

On Friday, when I met the petition’s creator, Claire Bosi, and some of its leading supporters, including the founder and CEO of Home Grown Hotels, Robin Hutson, and chefs Tom Kerridge and Angela Hartnett, I heard powerful examples that demonstrate the Government’s lack of deep understanding of the sector. To be clear, there is enormous gratitude for the considerable support that the Government have provided through the billions spent on measures such as the job retention scheme, the business rates holiday and various grants, including those announced by the Chancellor last week. The Government would do a lot better, however, if they stopped seeing the sector as being amenable to a one-size-fits-all approach. Ministers’ main lever for controlling the virus over the last nine months has been to switch the entire sector on or off at a moment’s notice, with little consideration given to its complexity and diversity.

When restrictions were eased over the summer, we saw the reopening of large chain pubs—with customers often bunched together at outside tables—at the same time as small restaurants and bed-and-breakfasts, where social distancing is easier to maintain. The curfew policy suffered from the same one-size-fits-all mindset. It was evidently drawn up with bars in mind, but unlike restaurants they do not have to turn over tables. The curfew might have been appropriate for a city centre bar—although there were many issues with large groups of customers all leaving at the same time—but it made no sense for small restaurants or rural hotels, which might have been unable to safely spread out the accommodation of all their guests for dinner as a consequence.

August’s eat out to help out scheme, although clearly popular at the time, was seemingly designed with little regard to whom it would help and the incentives that it would create. Rather than supporting those who are struggling the most, it potentially ended up being an untargeted giveaway to customers and businesses. It also made eating out much cheaper relative to takeaways and, in retrospect, helping restaurants by targeting subsidies at takeaways might have been more effective at boosting sales while maintaining the social distancing that is so required.

I understand that there are reasons why the Government have made lockdown announcements very shortly before their introduction, but that has caused some real issues for the sector. I was told of a chef in London who had two tonnes of oysters delivered just two hours after London entered tier 3, with no customers to serve them to. Yesterday, we heard reports of chickens possibly being culled due to a fall in bulk egg orders. When hotels were closed by national lockdown or entering tiers 3 and 4, hoteliers were left guessing whether they were even allowed to serve their guests breakfast in the morning. I know that these are not decisions that any Minister takes lightly, but if it is genuinely not possible to give more notice of such changes, what more can the Government do to support businesses that are caught off guard?

The repeated shutdowns of the hospitality sector have also meant that the businesses that supply it have been forced into hibernation for much of the past year. There is a whole other set of issues there that the current support measures—which are largely designed around jobs and rent, not around businesses holding large amounts of stock, often perishable—just do not reach. Little financial support has been available throughout the pandemic. With severe restrictions in place across the country since the autumn, demand for their stock has diminished seriously.

I also worry about the impact of that on-off cycle on the mental health of the staff who work in the sector. They have had to return suddenly to public-facing roles, turning on the charm and smiling at customers, when they do not know whether they will be able to hold on to their jobs for much longer. It has been great to see the widespread recognition of the strains that lockdown has put on the nation’s mental health, but we need to pay particular attention to the sectors most affected.

Thanks to the ingenuity and dedication of scientists in the UK and across the world, there is now a clear way out of this crisis. We know that the economic disruption will not be permanent. We will, no doubt, expect hospitality to play a significant part in the hoped-for bounce back of economic activity and employment, in particular among young people. We have good reason to believe that for at least the businesses that manage to survive.

The pandemic has concentrated a tremendous amount of economic pain on workers in certain sectors, predominantly insecure workers, and they deserve our utmost support. However, there has also been a build-up of savings among those more fortunate, who have been able to maintain a steady income. Many have saved the money that they used to spend on bars, hotels and restaurants, rather than splurging it on more parcels from Amazon, but there are limits to how much of that will ultimately be spent on hospitality in due course. In all likelihood, people are likely to go out to the pub two or three times a week, eventually, but that will not happen soon.

There will be a catch-up on spending in that social consumption—or we very much hope so—when things eventually return to normal. As the nation is vaccinated, the economy reopens and the rules we apply in hospitality inevitably become more nuanced and complex, it is important that we have input from the hospitality sector as to how we can design policy not to repeat the mistakes that were made in the summer of 2020 when the sector reopened.

We need to get ahead of the problems, and the petitioners have argued that splitting that representation between two crowded Departments—the Department for Business, Energy and Industrial Strategy, and the Department for Digital, Culture, Media and Sport—is not working. One of the leading supporters of the petition, Robin Hutson, put it succinctly:

“I’ve long held the view that the hospitality sector requires really focused representation in government. This is about the future of our industry and the campaign and petition showcases the strength of feeling across the country on this issue. Hospitality is a sector that deserves a seat at the top table.”

That responsibility sits across two Departments, which is not a problem. Hospitality sector businesses are businesses, but they are also a creative art—in fact, much of the arts sector relies on hospitality as a source of revenue to underpin its activities. We used to have more Ministers with cross-Department briefs, out of recognition that some issues unavoidably straddle Government Departments, but that seems to be out of fashion at the moment. I worry that it creates an incentive for passing the buck between Departments, which reinforces the case for a Minister for hospitality.

It is hard to believe some of more farcical debates that we have had, such as the controversy about whether a Scotch egg constitutes a meal. If we had a dedicated hospitality Minister, we might not have ended up with that mess. If a new ministerial role is not something that the Government are open to, we must at least recognise that the sector needs a strong voice in Government, with a genuine recognition of its diversity, greater engagement with businesses and a much deeper understanding of the different ways that they are affected by lockdown measures.

The hospitality sector is an industry that has always been driven by passion and soul. It is not an industry in which businesses generally have huge amounts of cash reserves, and we know that many businesses operate at just above break-even point. The industry knows it needs to encourage more home-grown talent, now that it cannot rely on people coming over from Europe. There is a levelling-up piece here, as I have mentioned. Hospitality is one of the few industries that is represented in almost every part of the country. It is an industry that is a gateway for so many people who do not particularly enjoy the academic side of school but who have creativity and graft and can be successful, if just given the chance. If the Government understood and took the industry seriously, it could be a route to transformation in every community right across the country. We need to raise the profile of hospitality and encourage young people from the UK to do apprenticeships and to see entering the industry as a “Sky’s the limit” career. As we set out our stall on the world stage in the post-Brexit era, one of the key things that will attract people to our country—with their investment—is our culture and its offerings, and a big part of that will be the richness and quality of our hospitality.

Newcastle’s hospitality sector has something for everyone: restaurants offering everything from hearty traditional Geordie pub grub to innovative fine dining, hipster-style hang-outs for craft beer and gourmet burgers, and a thriving street food scene. Our nightlife is famous in its own right and is regularly featured in guides and magazines—Newcastle is often one of the top places for an unforgettable night out. However, my fear in the current situation is that the larger, more standardised chains will have the resources to survive into the post-pandemic era, but the smaller, heart-and-soul operations might not. We will see a hollowing out of the sector. I do not want to see my city lose any part of what makes it unique, and I am sure colleagues feel the same way about their areas.

I know there is a limit to how much heart and soul people can give when they have been hammered month after month. Even in the best-case scenario, there are several months of closure ahead. Countless smaller owner-operators are now worse off than they were when the pandemic began. Some took out personally secured loans in March. Having spent the last nine months in difficulty, they are now looking at losing not only their businesses, but their homes. It is a real tragedy, because they were good and viable businesses before this unseen crisis came along.

What does the sector need? The one-off grants announced by the Chancellor last week will of course be strongly welcomed, and they should help more businesses to stay afloat. The resource that the Government have put in through the job retention scheme has been a lifeline to sector employees, but industry representatives have made it clear that the current support is not enough to cover the costs of many businesses and will not secure their long-term viability. We need a longer-term plan to help businesses to plan their survival while the vaccine is rolled out, starting with clarity on how long the new support payments will be available. UKHospitality and others have called for an extension of the business rates holiday and a 5% VAT rate, to provide certainty in the longer term. I would be grateful if the Minister commented on whether that is under consideration.

I also urge the Government to commit to examine urgently the inadequacies of their support measures as they relate to hospitality suppliers and, as I said in our previous debate on the night-time economy, to consider introducing some flexibility to the local restrictions support grants, to give local authorities the freedom to grant and target support towards the businesses that need it and can use it best.

The petitioners do not expect to go back to dining out, dancing in nightclubs and checking into hotels straightaway; the public health situation is at a critical point, and saving lives must take precedence. However, they want there to be a greater understanding of the diverse nature of their sector and a strong voice for them in Government. Above all, and like us, they want this country’s mix of pubs, hotels, restaurants and clubs, which does so much to enrich our lives, to still be standing when this crisis is over.

[Graham Stringer (in the Chair)]

I think it would be appropriate to impose a time limit of three minutes.

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[Jane Hunt (Loughborough) (Con)]

I first declare an interest, in that my husband works for a logistics company and deals directly with the hospitality sector in his role.

Looking at hospitality as a whole, we must first recognise the level of support that has been received generally within the sector throughout the covid crisis. However, three main themes are of great concern. The first is that there are many supporting and spin-off businesses that co-exist within this sector, but that seem not to have been included in all aspects of the support offered. The second is that the prolonged period in which the sector and those spin-off businesses have had to endure no customer revenue is stretching the limits to which they can wait for the sector to reopen once more, and the third is the lack of customer confidence in when the sector will be able to trade again.

A great many businesses in Loughborough are either directly part of, or related to, the hospitality sector: pubs, restaurants, cafés, bingo halls, nightclubs, bed and breakfasts, and hotels are obvious examples, and we have 290 such businesses locally, employing 3,000 people. We also have conference organisers, wedding event organisers and venues, lighting and audio technicians, event carpet and equipment suppliers, hair and beauty technicians, florists and printers, food production plants, breweries and catering equipment suppliers. Everything from hiring a tablecloth to arranging a major corporate event in Kuala Lumpur can be obtained from businesses in Loughborough. We are a very hospitable place.

Before covid, all of these business were not only viable, but thriving. However, economic output in this sector was down 92% in April 2020 compared with February 2020. If we want a V-shaped recovery, we must plan for one and support the businesses that will deliver it. For example, I understand that 264,000 weddings were missed last year. There will be pent-up demand, but if there are no businesses to deliver the events and services when we open up once more, that demand will not be met, and tax revenues will not materialise. There are revenues to be had: 475,000 weddings are currently scheduled for 2021, getting on for double the usual amount, creating the potential for an additional £25 billion in the sector. However, a lack of confidence that events will be allowed to go ahead means that weddings for spring and summer are already starting to be postponed and cancelled. In the meantime, finances are stretched to the limit for the whole of the hospitality sector, while businesses wait for permission to operate again. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) will present a 10-minute rule Bill tomorrow, advocating the abolition and reform of business rates. That would really help pubs and other hospitality outlets, both with immediate effect, and into the future, giving pubs the chance to remain the centre of our communities. In supporting my colleague’s aim I ask that business rate relief for the hospitality and leisure sector be extended for a further year to include related businesses during the pandemic.

The best way out of this crisis, for business, is to be able to trade. For businesses to be able to do that with confidence, we need the people we are most concerned about in our communities to be vaccinated, and we are well on the way to achieving that—

[Graham Stringer (in the Chair)]

Order.

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[Lucy Powell (Manchester Central) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate and thank my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) for securing the debate and for her excellent opening speech. I fully support her comments about remote participation in Westminster Hall.

I thank the instigators of the petition and the 200,000-plus people who signed it. That is an impressive number, but it is unsurprising, given that hospitality is the hardest-hit sector, as well as associated activities such as weddings, events and live entertainment. At the heart of the petition is the fact that people are looking for leadership, which is why they want a specific Minister. They want leadership, focus and understanding. I mean no disrespect to the Minister, with whom I share a lot of these occasions, but what we have had is bits—piecemeal, sticking-plaster support offers—alongside stop-start restrictions that have sometimes felt particularly pernicious for the sector and that have often lacked evidence.

The petition reflects the idea that the Government do not get hospitality in all its forms. As we have heard, hospitality includes lots of different businesses, but at the heart of it are people who have put their life’s work, livelihoods and love into creating businesses that bring people together. Often they have used personal assets to guarantee those businesses.

We have heard that hospitality is a huge part of our economy. It was the third biggest employer before covid, generating billions in turnover and tax. Such businesses make up the heart and soul of our town centres, city centres, high streets and communities. They are a key part of the ecosystem and they bring people and places together. We saw that recently in the BBC documentary that Tom Kerridge, one of the supporters of the petition, presented—it was an excellent programme. There is a wider ecosystem, too, from the supply chain that we have heard about to taxi drivers and security, as well as hotels, events and weddings. Hospitality is a huge, interlinked and diverse sector, and it employs many young people, those from black and minority ethnic backgrounds, and women. It was growing before, and it will grow again.

We welcomed the support that the hospitality sector had at the start of the pandemic. It was the right thing to do then, and it is right now that that support continues. Then, however, cash grant support was worth more. The other packages brought in at the time were designed for a much shorter period of time—loans, deferrals, moratoriums and so on. They are now not fit for purpose after nearly a year and growing of closures and lost trade. That is the key issue, which I think other Members have raised: what was initially designed for three months is now not appropriate for the 12 to 18 months that we are talking about.

Supporting businesses is the right thing to do economically. The Government said they would put their arm around the shoulder of the sector, but that must be maintained. Every previously viable business that goes bust will lengthen and deepen the long tail of recovery. That is not just the Labour view, but the view of the International Monetary Fund, the Bank of England and the OECD. We cannot cut our way out of a crisis. Lots of focus early on was rightly on the furlough scheme to protect jobs, but leading businesses now warn that without further support, those jobs will no longer be able to be furloughed as businesses go bust. A survey out today says 250,000 businesses, many of them in hospitality and associated areas, will fold this year. That is a devastating warning.

Supporting businesses is also the right thing to do morally, because they have closed to keep us safe. It is only right that the Government should step in to support them and keep them going. With light at the end of the tunnel, it is now even more important that there is a proper long-term plan to help businesses survive to that point and then thrive beyond it. I am sorry to say that despite some of the early actions taken, no such plan is forthcoming. We have the sticking-plaster approach to economic support, and there is no plan or route map for reopening. Contrast that with the approach of other countries, such as Germany and elsewhere. Speak to any business and it will say that cash flow is the major issue now. Action simply cannot wait until the Budget, because many businesses will be bust by then.

The furlough extension is welcome, but contributions are now stretching balance sheets. Businesses have taken the loans, deferrals and holidays, and they have not paid the rent, yet it is still not enough. The stop-start nature of the lockdowns has damaged business confidence and liquidity, and we have heard about the costs of restocking and losing stock along the way. Businesses were expecting the job retention bonus, but they had it taken away at the last minute, despite it being priced in. That was all before hospitality lost its golden months of the pre-Christmas trade, so it is no surprise that some of the latest business surveys show that more than half of hospitality businesses have less than three months of cash reserves. Only one in five hospitality businesses has enough to survive until March.

Just this week, we heard of Mitchells and Butlers, one of the oldest and biggest players in the sector, seeking to refinance. It is losing £40 million a month just to stay closed. I do not like to say so, but it feels a little like Ministers are asleep at the wheel. I am sure the Minister will tell us about the billions of pounds that have been spent, but unless the Government set out a long-term plan and a comprehensive framework to see businesses through to the spring, there will be waves of insolvencies and job losses. As somebody asked earlier, that prompts questions about the billions that have already been spent. What was it for if, at the critical juncture, the rug is pulled, and jobs and businesses are lost anyway?

We have to be honest about the announcements that have been made this week. The £9,000 is not available to most businesses; five out of six will get a lot less than that. Even when taken together with the local restrictions grant, it is still a lot less than what was received last time around. It does not even cover businesses in the supply chain, who are again waiting to see whether discretionary grants will come to them; for many, they will not.

What about the medium-sized businesses—the hotels, the chains, the breweries and others? As somebody said earlier, £9,000 is frankly a drop in the beer glass. There is no mention of the excluded, many of whom are associated with this sector. What was an outrage for these people for three months is now economically and mentally fatal for many after nearly 12 months. We called on the Government to begin by using the £2 billion repaid by supermarkets to provide proper support to businesses and the excluded, but they have yet to do so.

I am afraid that a huge amount of business uncertainty lies ahead. The Government urgently need to get ahead of that and make sure there is a comprehensive plan. There is a massive surge of a cash-flow crisis ahead of us, with businesses going bust. In the next few months, we are going to see the end of the evictions ban, the business rates holiday and the Government-backed loans. Corporation tax payments will be due and there will be an end to the VAT cut, the VAT deferral and measures to prevent insolvencies.

Businesses will need to start repaying their VAT deferrals and business rates in April, yet we heard this weekend that hospitality businesses will not even be reopened by then. This is now urgent. Businesses looking ahead at their cash flow are taking decisions about their staff and the future of their businesses today. This cannot wait until March. Something must be done. The VAT reduction will have little benefit for most businesses, because they have been closed during that time.

The failure of the Government to set out what might happen to those deadlines is creating massive anxiety, and will lead to wave after wave of insolvency and consequential job losses, not only extending and deepening the economic crisis, but taking with them all the loans and the previous investment in keeping them going up to this point. It makes no economic sense whatsoever.

Alongside this economic spring plan for businesses, we need a clear route map to reopening, as called for by the British Beer and Pub Association, UKHospitality and others. They want proper discussion now about the route map to reopening. What levels of vaccination, hospitalisations and mortality are needed for reopening, and what does that reopening look like? No household mixing? Substantial meals again? Curfews again? These have all caused extra burden when the evidence is clear.

In conclusion, hospitality businesses and their associated ecosystem need better leadership, focus and understanding. They need cash support that matches business need and revenue loss. There will be no businesses for firms to employ people unless this is done. They need immediate action on the uncertainty created about these cliff edges. That may involve big, creative thinking on some of the big issues coming up the track, with rent deferrals and the huge debt overhang, that will need to be addressed at some point. The Government need to stop their scattergun approach, which leads to sticking-plaster solutions, and come up with a proper long-term plan for this hugely important sector in distress.

[Graham Stringer (in the Chair)]

Minister, I ask you to leave two or three minutes at the end for the proposer.