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Morning Briefing Strap Line
Fri 11th Nov 2022 - Friday Opinion
Subjects: Seeking government support for hospitality, the war against business closures, why The Newt is the place to bee, don’t let an impending recession shake your focus on sustainability
Authors: Lord Smith of Hindhead CBE, Alastair Scott, Ann Elliott, Stephen Nolan

Seeking government support for hospitality by Lord Smith of Hindhead CBE

That we are facing some acute economic challenges at the moment is beyond dispute. Shortly, the government will publish the Autumn Statement, and rarely has a government statement of this kind been more anxiously anticipated. The significance of this for the reaction of the markets is obvious from recent events. The direction in which the government now moves in terms of its policy on tax and spend will have consequences for every household, every sector in our economy, and for the sustainability of the public finances.
 
The pandemic, coming as it did, when monetary policy was still reflecting the aftershocks of the financial crisis of 2007/08, hit the public finances hard. The war in Ukraine has added to our difficulties with supply shocks and rising prices, particularly in respect of energy, hitting everyone hard, particularly those on low incomes. In these circumstances, it is understandable that every family and every sector will look to the government for help. Government cannot, of course, solve all our problems, but support of those sectors that can contribute most to economic recovery and the sustainability of employment would normally be on any list. 
 
The hospitality sector is uniquely placed to contribute in this way, and the government has provided a lot of support throughout the pandemic, and currently, to our sector. The key to maintaining that support is, firstly, for the sector to speak with a united voice. This, of course, means our trade bodies, but also the media that produces headlines and articles that comment on government policy. Secondly, keeping our ‘asks’ of government simple, realistic and few in number. Let me deal with these two subjects in turn.
 
The main trade bodies have done a great job at representing the sector. UKHospitality, The British Beer & Pub Association and British Institute of Innkeepers have spoken with one voice and adopted a constructive approach. There have, however, been some ‘voices off’ that have sought to play party politics. I won’t embarrass the commentators by naming them, recent headlines claiming: “Government has ‘lost confidence of sector’ as Chancellor is replaced” and “Sector calls for General Election” are not persuasive in achieving the support we need, particularly when careful reading of the articles clearly show that none of our three trade bodies have called for any such thing! Equally, politically appointed, so-called ‘night czars’ calling for a change of government and turning support for our sector into a party-political issue is not a good strategy either. It is unlikely that any government is going to work constructively with leading lights who are busy crafting that government’s destruction.
 
Of course, people have every right to criticise the government – we live in a boisterous democracy, and long may that remain so. But public representatives of the trade, and the sector media that reports their efforts, need to decide whether their aim is political grandstanding or a good, supportive financial outcome from the government, any government. Media reports that constantly highlight doom and gloom for the hospitality industry, and in the next breath tell us how mergers, acquisitions and industry consolidation is increasing apace, and that many businesses are reporting levels of trade returning to pre-pandemic levels, only compound the mixed messaging.
 
So, consistent, non-partisan and constructive messaging are the key factors in achieving good lobbying outcomes. Which brings me to the second issue of making realistic demands of government in these difficult times. My advice is to avoid making a plethora of demands, particularly if it is obvious that some of them are simply unaffordable. 
 
Let us look at some basic facts about government income: In total, the UK government raised £915bn in taxes and other receipts in 2021/22. Income tax and national insurance raised £389bn, and VAT a further £143bn. VAT is therefore the third biggest contributor to government receipts. It doesn’t take Einstein to figure out that a substantial reduction in VAT – either across the board or specifically for hospitality – would be a very expensive measure. The government did reduce VAT during the pandemic, but at huge cost to the Exchequer, and this could not realistically be extended or reintroduced. If I were going to suggest a realistic ask for the sector, it would be to continue with the Retail, Hospitality and Leisure Business Rates Relief Scheme that was announced in the Budget on 27 October 2021.
 
Let me remind you of the benefits of this scheme. It provides £1.7bn of support to occupied retail, hospitality, and leisure properties. This support is delivered by way of a 50% reduction in payable business rates, with a cap of £110,000 per property. This support has been extended to retail shops, pubs, bars, restaurants, night clubs, social clubs, takeaways and coffee shops to name but a few. If the trade and its associated media could get behind a campaign for this scheme to be extended for another year, then that would, in my opinion, be an affordable and realistic ‘ask’ of government. It would also be consistent with a long-term goal of business rates reform.
 
‘Doom and gloom’ messaging suggesting apocalyptic outcomes unless a plethora of unaffordable demands of government are met is not the way forward. Hard-headed political realism is. It is also important to recognise that there is always more we can do to help ourselves. For example, if we want to attract bright, young people, or older people, to enter the sector, then emphasise opportunity and a bright future, not the sectors’ imminent demise. Perhaps the recruitment and retention of talent should be the subject for another article.
Lord Smith of Hindhead CBE is a Conservative Party Peer and chief executive of the Association of Conservative Clubs, of which some 800 private members’ social clubs are affiliated
 

The war against business closures by Alastair Scott

It is difficult to ignore that over the last few weeks in Harrogate, where I live and have two pub restaurants, there have been a few closures in hospitality. Harrogate is a funny town that I think confuses many of the demographic models. It is mostly quiet during the week outside of a fair crowd of locals who are out for a drink and sometimes a meal. At the weekend, however, it all changes.

The locals are out and about for their Friday or Saturday night, but also a large number of tourists, coming up from South Yorkshire or down from the north east for the weekend. During the summer months, the hen parties are out in full force, but oddly, there aren’t many stag parties. I think that some businesses enter Harrogate without having enough knowledge of trading patterns, and this contributes to a higher number of closures. 

For us in hospitality, then, the key is to strike a balance between being profitable on the quiet four days of the week, and then having enough staff to support the weekend, when there is plenty of opportunity for sales. Many businesses have chosen to close two days a week to save costs and have full complement of staff on the other five days. That works when your sales every day are similar, but for us, two out of three of our sales occur on the last three days of the week. So, in theory, two out of three of our staff costs should also be on those days. It means we need to spread out the remaining hours for the full timers over four days to avoid wasting staff costs. 

When you have varying sales every day, it’s hard to understand trading patterns. One of the best ways to keep an eye on sales trends and the required staff is to look at sales per labour hour. To calculate this, you look at the total sales for the day divided by the hours of labour used. We are set to peak this week at about £60/hr at the weekend but are down to £35/hr on quieter days. Of course, we do much of our admin on those days, and of course, it is harder to be efficient when it is quiet.

But if we want to stay alive in this challenging economic environment, we need to pay attention to this figure so we can be as efficient as possible with the hours we have and the money we are spending, especially on quieter days. Tracking your average sales helps you know if you have budgeted too much for labour, as overspending will affect profitability. Making money is even more paramount now than ever, and it all comes down to streamlining costs where we can. We want to get through this winter and avoid being on the list of closures, but it certainly won’t be easy!
Alastair Scott is chief executive of both Malvern Inns and Events and labour management system S4labour 

Why The Newt is the place to bee by Ann Elliott

In early 2021, after The Newt in Somerset had been open for a while, I suggested to some friends that we treat ourselves and stay there. They had a look at the prices and couldn’t bring themselves to spend so much, despite the fact that they had really successful careers. Then my friend died in December 2021, in his mid-60s, after a very short illness. We were all so shocked.
 
So, this year I just thought ‘sod it’ and booked a two-night stay for Sunday and Monday earlier this week. It has long been on my bucket list, and I’m a huge fan of Babylonstoren, a preserved Cape Dutch farm estate in the Drakenstein, South Africa, which is owned by the same family.
 
Once I had booked (and paid in full well in advance!) I received an email which proposed an itinerary for us:
 
Sunday, 6 November
2pm: Check in
3pm: Roman Villa Experience
7.15pm: Dinner in the Botanical Rooms
 
Monday, 7 November
10.30am: Deer Park Tour
12pm: Lunch in the Garden Café
2.30pm: Bee safari
4.30pm: Honey Tasting
7.30pm: Dinner in the Farmyard Kitchen
 
Tuesday, 8 November
11am: Check out
11am: Garden Tour
12.30pm: Story of Gardening
 
This could have felt a bit Center Parcs (which has had its place in our family lives), but it didn’t. It could have felt a bit starchy and formal considering the price, but it wasn’t. Instead, it was a complete, gorgeous, immersive and joyful experience.
 
I don’t know the owners, Koos and Karen Bekker, but they clearly had a vision when they bought the original house and 850 acres (for sale at a guide price of £13m) in 2013. The planning application to change the house talked about an aspiration “to create a high-quality environment which will enable the historic park, gardens and buildings to be accessible to the public, and to accommodate up to 100,000 visitors per year”.
 
It went on: “Through these proposals, there is a vision to give visitors the most exciting experience of what rural Somerset has to offer, including orchards and apple growing; walks through woodlands, parkland and gardens; and exploring the local heritage of cheese and cider production as well as the contemporary culture of good local produce and fine dining. The aim is to retain the features, materials and character of the existing buildings, and to use traditional techniques and local materials to retain the farmstead feel.”
 
They have achieved this and so much more at The Newt. While the Bekkers certainly have a long-term strategic vision (the estate is now over 2,000 acres, for instance, as a result of buying a number of nearby farms), it was also hard not to be impressed by the day-to-day demonstration of their values in the people we met.
 
Jim, head of the deer herd, talked openly about his ability to get what he wanted to do his job well. Ben, an apprentice from Preston working in the restaurant, was so enthusiastic about the team, the owners and the training he was receiving that he just wanted to return to The Newt once he had finished at university. Antonella, the experience manager, left us a bottle of cider to apologise for a time change for one of our visits. Paula, the beekeeper, talked about starting at The Newt two years before it opened and being given total freedom then to bring her vision alive. Everyone we met, without exception, was warm, kind, beyond helpful and demonstrated ‘Unreasonable Hospitality’ – read the book by Will Guidara to understand more.
 
This is an experience where no expense has been spared and no detail left untouched. The reconstructed Roman villa is a total delight, the gardens are gorgeous, the food is delicious, the rooms are exceptionally well thought through and the tours are interesting. I truly did not want to leave. Yes, it’s very expensive, but for me, it was totally and utterly worth it as I remember with joy all the elements which made up the whole of the experience. I just wish our friends could have been with us.
Ann Elliott is a hospitality consultant

Don’t let an impending recession shake your focus on sustainability by Stephen Nolan

Last week, Foodprint, the sustainability solution from Nutritics, published its first ever Sustainability Sentiment Index, exploring the attitudes of UK adults to sustainability when eating and drinking out. The research found that consumers are keen to make more sustainable choices in pubs, bars and restaurants, but their efforts are currently being hampered by a lack of useful information. 

The findings demonstrated clear demand from the public, particularly amongst Generation Z and Millennials, for operators to be more transparent with their sustainability credentials. However, with costs rising across the board, a lot of hospitality businesses are wondering whether they can afford to continue to invest in environmentally friendly initiatives. 

It was encouraging, therefore, to hear Burger King UK’s chief financial officer, Tim Doubleday, speaking last month at the launch of UKHospitality’s Sustainability Commitment, aimed at guiding the sector to achieve net zero by 2040. Doubleday talked about the importance of having long-term prospects and future value for your business, including robust environmental, social and governance (ESG) policies which you take seriously, and I couldn’t agree more. 

We firmly believe that environmental sustainability and economic sustainability go hand in hand. Yes, having a sustainability programme is the right thing to do for the planet, but it’s also the sensible thing to do for the future health of your business. Doubleday envisages a future where banks could lend money at preferential rates to businesses with stronger sustainability track records, and we know how closely private equity firms are now scrutinising ESG policies when they run the rule over potential investments. What’s more, as part of the government’s Green Finance Strategy, regulation is being introduced which requires large companies to report on their sustainability disclosures.

The direction of traffic is only moving in one direction. Sustainability has long since crossed the paradigm from exception to expectation, but as the conversations happening around COP27 demonstrate, the expectation as to what businesses should be doing has also increased. 

We expect that in the next few years, the number of businesses legally required to report on their disclosures will increase significantly. This starts with the implementation of the Corporate Sustainability Reporting Directive (CSRD), the new EU legislation requiring all large companies to publish regular reports on their environmental and social impact activities, which will be mandatory from 2024 across all sectors, including hospitality. 

The government will no doubt seek to further legislate to ensure the UK meets its commitment of net zero greenhouse gas emissions by 2050, and conversations have already started. Regardless of the legislative environment, consumers are looking for this information now. It may be tempting to put sustainability on the backburner while times are tough, but even with the current economic headwinds, this is an area that businesses can’t afford to ignore and offers the opportunity to gain a strong competitive advantage. 
Stephen Nolan is managing director of Nutritics, the team behind Foodprint

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