Hospitality is a unique industry. I am biased, but I truly believe that it’s one of the foundations of our society. It supports, and fuels everything around it, a bit like oil running through a car engine.
The sandwich shop that feeds the workies their bacon rolls as the sun rises. The café that feeds the office crew on their quick breaks. The bars that fuel the sports fans on their way to the big game on Saturday afternoons, (or help them drown their sorrows afterwards!). The restaurant that hosts special milestone moments in your life, from your first date, through to your retirement party. The hotel that sleeps transatlantic corporate travellers, doing business in every major global city, not to mention the millions of tourists that flock to the UK. (An estimated 37.5 million in 2023 according to the ONS).
The financial contribution is staggering to the economy, with 93 billion pounds GVA (Gross Value Added) to the UK economy in 2022, and it is growing at double the rate of the UK overall economy at 5.8% (ONS, 2022).
All this means, of course, an abundance of jobs, and the industry has accounted for around 17% of overall UK employment growth between 2009 and 2019. Placing it fifth in the total number of jobs created, it currently employs 3.5 million people in the UK, which is, only behind the wholesale retail trade, health, and social care sectors, in the rankings of employers (UK Hospitality, 2023). To put it bluntly, it’s essential.
It’s not only the fiscal numbers that are eye-watering. The sentimental and emotional connection to the industry became obvious throughout the COVID-19 pandemic. People locked inside their homes, sick of baking banana bread, yearning for proper social connections. You didn’t have to look very far to see people’s desperation, sitting in beer gardens the length, and breadth of the country, in the pouring rain. Queuing up to get a pint in a takeaway plastic cup, because those were the rules at the time. The streets would have been lined with people squirting Carling directly into their eyes if Matt Hancock had told them. It was the only way to have a pint.
I was working on the front line over this whole pandemic and the first thing guests said as they stepped into the restaurant was, “Oh, it feels so good to FINALLY be back.” Through a muffled pale blue, and white, nurses mask of course. Weeks without a good steak, and a cocktail felt like months.
Yet, despite this obvious importance and influence, the industry that we all love, (whether directly or indirectly), is on its knees. Ten venues closed every day in the last quarter of 2023 (AlixPartners and CGA/Nielsen IQ, 2023). There seems to be a perfect storm of factors which are culminating in the industry being squeezed in more and more ways. Contributory illustrative factors are rising rents, soaring raw food ingredient costs, the general cost of living crisis, and Brexit impacts on finding staffing, all being blamed.
A recent report by Planday, (Biggest Shift: How to improve retention hospitality, 2024,) found that 85% of workers in the hospitality industry experience poor mental health, this from 2000 surveyed respondents. Alarmingly 53% of those surveyed said they were considering leaving their job in the immediate future. Not a great outlook for an industry already experiencing a staff and skill shortage.
It’s easy to get swept up in the news stories and buzzwords thrown around in everyday conversation. But how is this all affecting local businesses?
I decided to do some market research for myself and sat down with 3 of my favourite local independent businesses situated in a next-door locale to each other, which I have used regularly over the past few years.
David Clayden, (Dave), is the owner of Hanks. A very busy, and popular sandwich joint serving hot paninis, soup, and delicious handmade sandwiches, always with a queue around the block at lunchtime. (I would run through a brick wall for their Haggis and Sweet Chilli Panini BTW… 12/10 would recommend).
I nipped into Hanks after the lunch rush and sat down with Dave, whilst his team was busy cleaning down, and asked how he started in hospitality.
“Absolute laziness” he laughs. “I didn’t apply myself in school and loved cooking with my dad”. David comes from a family of chefs, and even his granddad was a house butler, it’s literally in his DNA. Despite his humility, it’s clear that Dave has worked incredibly hard to get where he is today, and after years of business catering in the city, he bought Hanks in 2019. Local construction projects and offices helped his trading in the first few months, but of course, the pandemic hit in March 2020 and Dave was down to a skeleton staff of 2 selling sandwiches at the front door of the shop until he was able to open again fully in July 2020.
Since then, business has been good. There are plans to open a production kitchen and food truck in the future. I asked Dave what his biggest struggles are running a local business in 2024. Recruitment is an all too familiar answer. He reckons that only 1 in 4 people who apply for a job even turn up to the interview. It’s not like it’s an unattractive offer. A good wage, free meals, and drinks on shift, with a work pattern of Monday to Friday, and a consistent finish around 3 pm each day (I might slip him my CV…). His hiring policy is based on personality and attitude. It doesn’t matter what generation you are, where you come from, or, what you look like.
“There’s no hiding space in this job, you have to work hard”. Finding people that he can trust and possess a good work ethic are key deciders, and it’s the values that Dave has built his existing team.
Costs are the next big issue. Dave gave me some examples of how inflation has impacted him, causing the skyrocketing of some of his daily fresh produce. Mayonnaise, for example, has gone up 111% and he gets through 5 large tubs a week. Sausages have gone up 114% per kg. The price of his sandwiches can’t go up by over 100%, so what is he to do? It’s a very fine line between making enough profit to grow, keeping loyal customers on the side, and coming back.
“I would rather see someone come in every morning for their bacon roll and coffee and make 10p profit than make £2 and never see them again”.
It’s this attitude that keeps a very loyal customer base coming back to Hanks daily to see Dave, Jenny, Morag, and the rest of the team. As you walk into the shop, you’re always greeted with a smile, and a joke, even down to your name being remembered, and written on your order. Even at the height of lunchtime, I don’t think I’ve ever waited more than a few minutes.
Things continuously are made unnecessarily hard, the VAT that was reduced to 5% from July 2020 to September 2021, then to a 12.5% rate until March 2022, has now risen to 20%. Although none of the problems aforementioned has gotten any better. Some like the cost of goods and rent rates have gotten far worse. Inconsistencies with apprentice schemes, and relief grants, for small businesses just have not kept up with the lightning-quick changes in the industry over the last few years, and already seem inadequate in their effectiveness.
“Why is coffee and a bacon roll a luxury?” Laughs Dave. There doesn’t seem to be much help for the guys that want to do the right thing. The guys that dutifully pay their taxes.
I round off the conversation with the burning question. Where do we go from here?
“The rules have stayed the same for 30 years, but customer expectations for their pound have soared. The main thing is maintaining consistent, good quality products, try and innovate”.
Consistency and quality of services are the two things that Hanks gets right, but it seems to me from my conversation with Dave, that another constant is that they are getting squeezed from every other angle. Running a business is difficult we all know that, but surely some things don’t have to be as hard as they are currently.
Next on my travels is a quick jump next door to have a chat with Ali Boyd, (Ali), who is co-owner of The Coffee Cave. A fantastic little coffee shop, also selling hot sausage rolls, homemade cakes, and pastries as well as some, (rather comfortable), jumpers, and hats, sporting their mascot, a latte-drinking blue bear. Ali is as down-to-earth and friendly as they come. He even joined in our Global Talent 2020 Fantasy Football league, (he is dead last but it’s the taking part that counts right Ali?)
“I’ve always worked in hospitality one way or another”. He started in Prestonfield house as a waiter and worked his way upwards, loving the connection with people. Fast forward to February of 2020 and The Coffee Cave opened in all its glory… only to walk straight into the pandemic. They had to wait until May 2021 before reopening again for good.
Ali is also humble when asked about his shop. It’s a simple business, good coffee served with a smile, popular with tourists, and local commuters grabbing a pick me up to/and fro, on their way to work. Things can always improve though, and they are constantly changing their offering of merchandise, cakes, and promoting activity on social media.
His struggles seem familiar, but rising costs are also hard to ignore. Milk has gone up 75% in the last year, not ideal when you go through 20 litres a day!
“You don’t want to pass it onto the customer, but you can only shield them from the rising costs so much”.
VAT is also a killer for his business. Reaching the threshold is a milestone for a small business, and shows its evolutionary success, however, it’s 20% growth that’s needed the following year to just make the same amount of profit. Ali says he understands incremental YoY growth is important and is constantly adapting to drive his business forward. But that’s a lot to ask, no? It is like your bike stabilisers coming off, and suddenly realising you’re whizzing along in the Tour de France, not on a sedate cycle path. A reduction to 10% rate, would ease the pressure on so many small businesses, and give them some breathing space to regroup, strengthen, and build resilience. Less Tour de France and become more a Tour de force!
As we talk there are three, or four customers, that come and go, Ali knows them all by name, their memorised coffee order, and what they did last weekend.
So where do we go from here? I ask. Ali shrugs.
“The only way is up; you have to have optimism.” I like that. Optimism is most certainly a value of the team at the Coffee Cave, and it’s the positivity that keeps its customers coming back. However, there is also a cautiousness that comes with running any small business.
“If you don’t use the local business that you like then it’ll disappear”. It’s a cliché quip by now, but the old ones are goldies, and true. In a world where it’s sold to us that convenience is king, there are still those of us who choose to go a little further and pay a fairer price to get a quality product. from a friendly face.
My last stop of the day is to see Graham Savage, at Grow Urban. A unique offering, that combines quality coffee, an amazing range of plants, and decorative objects. (My cactus is still going strong from there, although I think they are impossible to kill).
There’s something about plants, and greenery, that create such a relaxing and serene ambience. Combined with the friendly team, and the quality aroma of coffee it is a great place to spend an hour or two, even just you and your laptop!
Graham has an impressive independent business track record, opening his first bakery business at 28 years old, and running it successfully for 7 years. He sold that on and opened Grow Urban in 2019. Which operates 2 sites in Edinburgh, but also sells plants all over the UK, online. He is a hands-on owner and took a break from serving hot coffee to have a chat with me.
Coffee accounts for 20% of his trade, so it’s nice to get a view from a different retail-led operator. This brings with it new challenges, from global multi-billion-pound corporations. A common theme is people browsing the shop, picking what they like, and then stating they’ll just go home, and “buy it on Amazon” …
This frustration comes with the retail territory, unfortunately, and it’s a similar story across the rest of the high street. I am keen to find out what specific, and current struggles Graham faces now.
Recruitment again is a common theme. It’s quite a specific skillset needed for Grow Urban, someone who can make a perfect barista coffee, but also is knowledgeable about plants, botanicas, and how to care for them.
“We’re not looking for horticulturists” Graham laughs. “What I always look for is someone who can make an instant connection with people”.
It seems that candidates are choosing their employer, rather than the other way around, with the biggest focus being on flexibility. I can vouch for this, with a skill shortage across the board in many different industries, but especially evident in hospitality and retail. Candidates can pick and choose their employer. We have all heard the ghosting stories.
Unsurprisingly it’s costs that are also starting to grate. I get a feeling of déjà vu. The electricity bill alone has trebled in the last 6 months for Graham, and the shops teams. It’s difficult to justify when it seems every week that a new energy supplier is posting billion-pound profits…
Brexit again, has also had a unique impact on his businesses with an increase in red tape for the process of shipping the more exotic plants across from Europe. Grow Urban now must pay an additional cost for an inspector to examine the plants in Holland, something that would not have been necessary pre-Brexit.
Graham’s outlook is positive though, despite all of this.
“We need a period of economic growth, positivity, need a new beginning, we need a change.”
It seems that all these businesses are stuck in a never-ending loop of rising bills, dichotomy red tape, recruitment struggles, lack of consistent tax/rate relief, and no real economic growth to look forward to.
So – Where do we go from here?
The one thing I’ve taken away from these three chats is that all these businesses are run by smart, resilient, and adaptable professional people. Whatever is thrown at them, these local venues will roll up their sleeves, and just get on with it. The core rules, and values, of running a hospitality or retail business haven’t changed, and won’t change anytime soon. These guys will continue to hire great people when they find them, deliver a quality consistent service, and achieve growth when possible.
But we must help. If there’s anything that history has told us it’s that things don’t change without parading the streets, burning bras, and making a song and dance. Sign that petition. Stop by your local coffee shop, instead of the big mega-buck’s clone chains. Have a chat, and a laugh, with the staff behind the till. Just buy the bloody plant in the shop, and don’t give Jeff Bezos any more money of your hard-earned!
We’re at a point now where every penny counts. Those pennies need to go into the pockets of the local shops, and cafes short term, and long term there needs to be more support from the UK Government. The quickest and easiest way is to lower the VAT to 10% to provide some sort of breathing space at least.
In a statement by the current government on April 26th, 2022, they responded to the idea on the UK Parliament website:
“The Government has been clear that the reduced rate of VAT for hospitality and tourism was a temporary measure designed to support the sectors that have been severely affected by COVID-19. It is appropriate that as restrictions are lifted and demand for goods and services in these sectors increases, the temporary tax reliefs are first reduced, and then removed, to rebuild and strengthen the public finances.”
That works in theory if you’re playing ‘United Kingdom the Board Game’ and maybe a nice answer to a GSCE economics question but we’re past that stage of a perfect world now. Surely a tax break for the industry as prominent as hospitality and retail will not only ease stress for these operators but will mean prices stay low, growth is achievable, their customers spend more and in turn, kick start the economy. It seems like the first domino that needs to be pushed over.
I am biased, and I’m proud to be.
Sign the petition HERE.
Blog written by Ben Jones
