Hospitality Industry Could Lead Economic Recovery

17 October 2011

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Hospitality Industry Could Lead Economic Recovery

Does the Government Share the Hospitality Industry's appetite for growth?

Last year, Prime Minister David Cameron placed the hospitality industry at the heart of the UK’s economic recovery. With a package of high-profile events in the pipeline, including the Queen’s Jubilee and the 2012 Olympic Games in London, hospitality is well-positioned to lead the UK economy away from recession.

Indeed, a new report from Oxford Economics and the British Hospitality Association claims that the industry can generate 475,000 jobs by 2020 … but, as always, there’s a snag!

Our Uncompetitive Hospitality Industry

Growth in the UK’s hospitality industry is hindered by Britain’s lack of price competitiveness – ranking only 135th out of 139 countries in the World Economic Forum’s Travel and Tourism Competitiveness Index.

Factors that inhibit the price competitiveness of the UK’s hospitality industry include Air Passenger Duty, visa controls and the higher VAT rate – possibly the biggest bone of contention for UK hotel industry in many years because on the continent all but two EU member states have reduced VAT on accommodation and attractions.

“We want government to address the issues raised,” said InterContinental Hotels Group managing director for the UK and Ireland, Stephen McCall, “so our sector can start delivering the job-fuelled recovery the country so desperately needs.”

“With 269 hotels in the UK, we are creating 3,000 jobs in this country over the next few years. We want to do more.”

Sizing Up the UK Hospitality Industry

The report, which identifies the hospitality industry’s contribution to each of the 406 local authorities throughout the country, says that the hospitality industry directly employs 2.4m people and contributes over £46 bn in wages and profits to local economies every year, but the high rate of VAT on accommodation and attractions makes UK tourism uncompetitive with the rest of Europe.

While Westminster has the highest number of hospitality jobs of all local authority areas in the country (86,000), and is easily the biggest in terms of wages and profits (GVA) (£2.4bn) the Isles of Scilly and areas in Cumbria and in the south-west are the local authorities most dependent on the success of the hospitality industry and on the tourism industry generally.

Almost two in every ten employees in Kensington and Chelsea work in hospitality (16.8 per cent), but the percentage is almost as high in the Isles of Scilly (15.9 per cent), South Lakeland (15.7 per cent), Eden (15.6 per cent) and Scarborough (14.9 per cent).

Taking direct, indirect and induced employment and GVA into account, over quarter of all employees in the Isles of Scilly are dependent on the hospitality industry (25.3 per cent) and they contribute almost 40 per cent to the islands’ GVA (39.3 per cent).

“These figures show how dependent many local authority areas are on the hospitality industry,” said BHA chief executive, Ufi Ibrahim.

“It is a key contributor to every local authority’s economic livelihood and particularly to its job-creating and wealth-creating potential. The industry should be seen as an essential part of every local plan.”

“The challenge now is to make sure that the national and local government to provide the right framework in which the industry can grow and create more jobs.

Evidently, the UK hospitality industry does have the potential to lead economic recovery – David Cameron said as much in his landmark speech and figures from Oxford Economics present a compelling business case – but growth can only be triggered by policy and legislative changes in Whitehall.

The industry has the appetite for growth … but does the government?