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Hospitality on the cliff edge | accountingweb
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Our hospitality industry is in the soup

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The UK’s hospitality sector has been hard hit by events of the past few years. Makbul Patel serves up a taster of the causes and hopes for the future.

3rd Jan 2023
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Being on the UK’s foremost cooking show has some interesting side effects. The Great British Bake Off draws in many viewers and this was especially the case in 2020, when Covid had its deathly grip on the world. The show brought much-needed comfort and I was part of the line-up.

After the show finished, I was branded as someone who could be relied on to make a killer Victoria sponge and to deliver crowd-pleasing cooking shows at food festivals. This dovetailed quite neatly with my professional career as a management accountant.

Then I got a call from a businessman with a proposal.

The man, a property tycoon, was quite taken in by my (local) high-profile personality. He had recently acquired a prominently located building and wished to convert it into a stylish cafe. “Shabby chic” he kept saying. He had a reputation for doing this across the country, but what he wanted to do differently this time was launch the cafe in association with a personality. He couldn’t find one, so he came to me. (Cue laughter from the audience…!) The developer would erect the tent, so to speak, and I would enter the stage as ringmaster, introducing a spectacle to behold.

Smell of success

Of course, I was not so naive as to think that this would be a free ride. For the partnership to work I would have to invest considerable time and money myself. But it was the opportunity of a lifetime – “Do it now or forever live in regret” were the smooth words of the developer that rested on my brain. His vision captivated me: running a thriving cafe and being the centre of a foodie world with chic clients grazing on sophisticated brunches and raising a toast to the chef at the heart of it all. I could almost smell it.

But, as always, you should look before you jump. This is where I will be eternally grateful to my close family and friends. Life very rarely offers no-risk opportunities. My chef friends thought I was mad to even give a passing thought to running a food establishment. What was I thinking, waving goodbye to relatively stress-free days? It would be farewell to my family and hello to 80-hour weeks and constant anxiety. After many hours and sleepless nights, the proposal was declined. The businessman and I parted ways.

The hard facts

My decision not to go ahead with the cafe venture coincided with a report on the decline of the UK hospitality sector featured in The Caterer magazine by Katherine Price. The report painted a very bleak picture indeed as illustrated in the chart below, which focuses on restaurants only.

Chart, line chart

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(Source: Alix Partners Hospitality Market. Oct 2022)

 

This chart shows the decline in the number of restaurants in the UK. The alarming drop during Covid did not see a recovery in the subsequent years, even though the whole of the UK was open, especially during the Eat Out To Help Out scheme period. 

Okay, you might say, that is only one section of the hospitality sector, what about the other areas? Unfortunately, it is much the same story. 

Chart, line chart

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(Source: Alix Partners Hospitality Market. Oct 2022)

 

The decline has continued. The Covid drop has been brutal for casual dining, which is closely linked to the restaurant trade. I would put cafes like the one I was in talks about in this sector, and reading the chart I think I dodged a bullet.

Figures and charts look very pretty but behind each failure of a business there is a real-life story. The end of dreams and loss of a livelihood.

Many bankruptcies were inevitable during Covid. An amazing cafe near my house, failed to open after the Covid restrictions were lifted. The street felt lonelier and permeated a gloom that could be felt around the town.

Business consultancy Mazar’s also underlined what was contained in The Caterer’s article. The hospitality sector has fallen very hard. There are three main reasons, one of them starkly British-made. No prizes for guessing which one.

1. Brexit

Britain shot itself in the foot when it decided to leave the EU. I am an unapologetic remainer. When the vote came to leave the EU, by the finest of margins, I was heartbroken. And, after many years of empty promises by the government, the benefits haven’t materialised. Not only has economic trade fallen off a cliff edge but the free movement of people has led to a catastrophic shortage of labour. Shortage of labour then translates into high wage demands. High wage demands follow through to unsustainable prices. The acute shortage is not exclusive to the hospitality sector but it is this area where it is hardest to plug the gaps. Many chefs were already working unreasonable hours, so the shortage of labour has pummelled them to the ground.

2. Inflation

Perhaps this reason is universal. The apocalyptic situation the world finds itself in has touched everyone; there is turmoil from wars, disease and drought. Families are cutting back. Inflation on fuel and food has led many families to the brink. Raw material prices have reached levels previously unthinkable and at a rapid rate.

Budgets are tighter and dining out at restaurants has become a luxury. I have been aghast when getting the bill on a casual foray into a restaurant. It has made me think twice about eating out and many have given up completely. Meals at home are the order of the day.

3. Gas and electricity prices

I have separated gas and electricity from inflation. In the past when there was high inflation (UK) gas and electric prices behaved themselves to an extent. There was no mass panic. But the energy price cap has risen 96% from 2020/21, which has sucked the joy out of life.

Just desserts

The perfect storm of high energy costs, high raw material costs, high rents and scarcity of labour has floored the hospitality industry. With families trembling at the prospect of a doom-laden 2023 the forecast isn’t rosy. I still think of that scene in the film Billy Elliot where the father hacks the precious piano down to make firewood.

But the strongest survive and after we have gone through this hardship there will be sunlight, flowery meadows and cheer. It is hard to imagine. You read one news article that offers some hope and then the next day there are 10 others that pull you back into the pit of despair.

But as human beings we have an inbuilt capacity for positive thinking and looking after those around us. Better days are ahead.

Replies (2)

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By kestrepo
04th Jan 2023 10:30

The barriers to entry in the foodie world are relatively low. Sure you have to have the correct licenses and appropriate facilities but they are not by any means beyond reach. One of the key ingredients in starting a new venture is time - if you weren't willing to put in the hours you made the right decision!

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By moneymanager
05th Jan 2023 12:22

The benfits, not neccessarily ecomomic but political trajectory, have not materialised becasue government has prevented them from doing so, inflation hasn;t "happened", it has been casued quite deliberately by the truly insane process of supply chain destruction, removal of energy supplies from the market (a policy of the communistic Technocracy Movement of the 1930s), and of course the whole Covid insanity fraud of which the wheels are now falling, inflation isn't just "prices going up", it is the expression of the destruction of a currency's value, "the pound in your pocket" is now worth sod all. The catering industry was not only badly hit by enforced closure, it was hit again as opening up was promised only to be rescinded after restocking had occured leading to more working capital destruction, who but government could get away with selling Bounce Back Loans only for the borrower to be actively prevented from doing just that?

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