Perfect storm on the way for UK hospitality industry

Consumers to face increasing prices

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, a premier provider of executive search, leadership consulting and culture shapingworldwide, spoke to chairmen and chief executives from some of the biggest organisations in the industry, representing businesses with revenues of over £40bn 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 per cent, while another was seeing meat costs rise by 29 per cent. 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 per cent European, with more than a third of those businesses hiring EU citizens to fill 50-75 per cent of their workforce.

According to the report, post-Brexit the hospitality industry pay bill will increase by £1.4bn in the first year, and could rise by just over £1bn a year over three years, amounting to a total cost of £3.2bn. 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.