Hospitality is at the heart of what makes London tick.
The bustling pubs with busy beer gardens. The restaurants filled with families toasting a special occasion. The bars packed with friends catching up. The hotels welcoming in visitors for their first taste of one of the best cities in the world.
There’s no doubt that London’s hospitality, tourism and leisure offer is a true global attraction. It is such an asset to the economy, local jobs, high streets and our standing on the world stage — we cannot take it for granted.
But there is a storm brewing for the hospitality businesses that make up the foundation for our beloved capital. The tax burden for hospitality has continued to grow exponentially, and it remains the highest in the economy. Changes to employer National Insurance Contributions have sent employment costs soaring, energy prices remain significantly higher than they were two or three years ago, and the cost of food and drink continues to climb.
Now, staggering increases to business rates are coming in April and it could be the straw that breaks many a camel’s back.
The end of business rates relief, huge increases to property values and a much lower discount on business rates than expected for hospitality properties are seeing pubs, hotels, restaurants and cafes, to name a few, facing business rates bills increasing by thousands, or tens of thousands for some.
For the average hotel, over three years their business rates will increase by 115 per cent. That’s a total increase exceeding £200,000. For our local pubs, their rates will increase by 76 per cent — a total increase of more than £12,000.
Compared to five other major cities in England, hospitality businesses in the capital have seen their rateable values increase the most — an increase of 63 per cent.
A trail of broken promises
London is already the most expensive place in the country to do business — these cost hikes make it even harder.
This is the opposite of what the Government promised. In the Labour Party’s manifesto, it committed to level the playing field between the high street and online giants.
Instead, local pubs, neighbourhood restaurants and independent hotels have been left worse off than distribution warehouses, large supermarkets and office blocks.
The playing field hasn’t been levelled. Instead, the chasm has continued to grow disproportionately.
This problem needs to be solved, and quickly. It’s not even two months until businesses will be paying these increased rates bills, and they’re telling me it’s simply unsustainable.
There have been positive announcements from the Government about support for pubs — that’s good news.
But what about our hotels, our restaurants, our bars and our cafes?
The Government’s commitment was to reform the system to benefit the entire high street. This is a hospitality-wide problem that needs a hospitality-wide solution.
The answer is simple: increase the business rates discount from the current offering of 5p in the pound, to 20p. That’s the maximum permitted in law — legislation that the Government themselves implemented.
Putting in place that maximum discount will show the sector that you’re serious about rectifying this issue and genuinely levelling the playing field for the high street.
Help is needed for all, not just pubs
Businesses in hospitality and on the high street all benefit from one another — it is a virtuous circle.
A family coming into London for a show will likely be staying the night, treating themselves to a meal and maybe a leisurely pint afterwards. The next day they’ll be grabbing a coffee and breakfast from the local café.
Excluding parts of the sector from support only risks diminishing the complete hospitality offering we have here.
It’s not just within hospitality either — our sector is so important for the London economy as a whole. One in 10 jobs in the capital are within hospitality, and the sector contributes more than £20 billion to the London economy.
It’s critical we get this right and support the businesses that drive this growth, create local jobs, and attract investment.
Because the soft power that a thriving hospitality, tourism and leisure sector gives the capital is so important — it’s why firms want to invest in and locate themselves in London.
Businesses want to be located in vibrant cities with a booming hospitality sector. Just look at areas of hospitality-led regeneration, like King’s Cross, Old Street and Farringdon.
Of course, work on a local authority and Mayoral level is also needed to achieve this, and there is positive collaboration on improving licensing and pedestrianising Oxford Street, to name just two.
But ultimately, hospitality businesses need a lower and more sustainable tax burden to achieve their potential to grow, create more jobs and regenerate our high streets.
Right now, that starts with fixing business rates across the industry. No part of hospitality on the high street will be immune from these hikes and getting it right will be critical to ensure we don’t see job losses and business closures accelerate.
If we want to keep the hospitality heart of London beating strong, we need that sector-wide solution.
Kate Nicholls OBE is the Chair of UKHospitality
