Hospitality Industry: Government Support

Mark Pawsey Excerpts

Monday 11th January 2021 Westminster Hall

[Mark Pawsey (Rugby) (Con)]

It is a pleasure to take part in this important debate after receiving 50 representations to do so from constituents, including from pubs—The Red Lion in Hillmorton, and The Griffin in Kingsway. I want to talk about the impact on supply, as one or two Members have already done. I spent 30 years as a supplier to the catering trade. In that regard, I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

We often appreciate things when they are not there, and we are missing our pubs, cafés and restaurants right now. When they are not operating, it has a significant effect on the suppliers to the sector. Although I welcome the support that the Chancellor has spoken about—he referred to £4.5 billion today—many of the suppliers are not receiving the same level of support as the trading companies. During the pandemic, we have seen food purchases transferred from out-of-home to in-home consumption, and the beneficiaries have been supermarkets, which have done well out of the restrictions. Most have reported higher sales. For example, Tesco sales were up 11% over the Christmas period.

It is often assumed by many that suppliers and food manufacturers are able to switch production and pivot to supplying retail, but catering and retail products are very different, and as a consequence those businesses are losing out. We have heard about the switching on and off of hospitality, which has led to a great deal of stock being wasted. The food supplier, Creed Foodservice, spoke at the weekend about £6,000 of milk going out of date because of the decision to close schools. It says that it has written off £150,000-worth of food since April.

The business I ran supplied tableware items—things such as paper napkins, table covers and Christmas crackers. I have to say that an awful lot of the crackers that were bought for Christmas in 2020 were not pulled. Now, they can be held in stock and used for another year, but of course that involves tying up capital and taking up warehouse space, which are costs to those businesses.

Food service businesses continue to pay bills such as rent, electricity for chillers and loan payments for vehicles that are often standing idle. Wholesale distributors are usually high-volume, low-margin businesses, and the fixed costs mean that a relatively small fall in sales has a disproportionate impact on profitability. Too long a period without profit will cause many suppliers to fail.

In addition, the catering trade—restaurants and pubs—often use the cash sales generated in the current period to pay for goods received in the previous period when they were trading. That has led to many suppliers becoming banks and funding their customers. There is very little action that those suppliers can take if the hospitality businesses do not have the cash to pay them. I hope that the Minister in his response will show his appreciation for the supply chain, as well as for valued hospitality businesses.