Perfect storm on the way for UK hospitality industry;

Perfect storm on the way for UK hospitality industry;

Perfect storm on the way for UK hospitality industry;

Consumers to face increasing prices

 

  • More than half (55%) of hospitality and leisure sector leaders are ‘concerned’ about the state of the economy.
  • The cost of food imports is a particular worry, with consumers having not yet felt the impact of these rising costs on their bills.
  • One in ten (10%) think that business confidence is much worse now compared to previous years.
  • Talent remains the biggest long-term challenge, with a million job shortfall predicted post-Brexit by 2029.

 

LONDON, 02 June 2017 – The hospitality industry is facing a perfect storm, with more than half of business leaders concerned about rising costs, the employment picture, security, and the sustainability of consumer confidence.

 

Heidrick & Struggles (Nasdaq: HSII), a premier provider of executive search, leadership consulting and culture shaping worldwide, spoke to Chairmen and Chief Executives from some of the biggest organisations in the industry, representing businesses with revenues of over £40 billion and employing more than a million people across the UK. While views on their specific business or sector could vary, the overarching theme was one of significant concern.

 

The report by Heidrick & Struggles, in partnership with the British Hospitality Association, found a range of issues worrying industry leaders. Most notably, rising costs are high up the agenda, with the fall in the pound following Britain’s decision to leave the EU having a huge impact on the cost of key imports that is yet to be felt by consumers. One CEO complained about the cost of butter, with an increased cost to her business of 46%, while another was seeing meat costs rise by 29%. This will mean higher bills for diners and holidaymakers, but according the majority of CEOs, consumers are yet to react negatively to price rises because the majority of these costs are yet to hit them.

 

Businesses in the sector are anticipating a recruitment gap of over a million jobs by 2029, according to a report by the BHA and KPMG earlier this year, which would mean the industry would need to recruit 60,000 UK workers in addition to sustained recruitment of 200,000 more per annum to meet the demands of growth. Filling these openings would likely be impossible without hiring migrant workers. Firms are heavily reliant on European workers, with half of CEOs reporting their workforce as 25-50%European, with more than a third of those businesses hiring EU citizens to fill 50-75% of their workforce.

 

According to the report, post-Brexit the hospitality industry pay bill will increase by £1.4 billion in the first year, and could rise by just over £1 billion a year over three years, amounting to a total cost of £3.2 billion. Wider economic changes are also adding to the pressure for the hospitality and leisure sector as business rates rise, and the apprenticeship levy and pensions auto-enrolment begin.

 

Ben Twynam, Partner at Heidrick & Struggles, said: “We have seen real concern from the most senior people across the hospitality industry, not only about talent and other Brexit-related concerns, but due to a number of headwinds facing the industry. With the cost of imports continuing to rise, increasing prices for customers and an expectation of decreasing consumer confidence in 2018 and 2019, there are a number of challengers facing businesses across the sector. While industry leaders are relatively confident about the remainder of 2017, they are far more pessimistic about the two years thereafter, when the real impact of Brexit will come to fruition.”

 

Ufi Ibrahim, the chief executive of the British Hospitality Association, said: “It is no exaggeration to say that hospitality and tourism face a perfect storm which is well articulated by our industry’s  top executives in this report – a looming recruitment crisis caused by cuts to come in EU immigration, rising costs on both materials and labour, increased business rates and a tax regime that favours our European competitors. We have been urgently discussing these matters with the last government and will do so with the next. Our 10-year strategy to encourage more UK workers into the industry has been well received and we have confidence that with government support we can continue to grow what is the fourth largest industry in the UK.

 

The hospitality and leisure industry is the fourth-largest employer in the UK, with 4.5 million people working in more than 180,000 businesses across the country.

 

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