Covid-19: Hospitality Industry

Part of the debate – in the House of Commons at 6:40 pm on 24th March 2021.

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Photo of Lucy Powell Lucy Powell Shadow Minister (Business, Energy and Industrial Strategy) 6:40 pm, 24th March 2021

I thank my hon. Friend Ruth Cadbury and Selaine Saxby for securing this debate.

In the interests of fairness, I wish to put on record the very vibrant, trendy fashionable nature of Manchester city centre, with its wide hospitality, cultural and night-time economy. I think I have in my constituency the most pubs and bars out of any Member in this House. I say that just in the interests of fairness, of course. I also put on record my admiration for and pride in our hospitality sector and supply chain and the difficult role that it has played in keeping us all safe this year.

The Government have a moral duty, as well as an economic imperative, to ensure that as many shuttered businesses as possible are able to reopen viably. We supported lockdown and the “whatever it takes” mantra, but we have seen economic support increasingly diverge from public health measures. This is wrong. There is also a huge economic cost in seeing successful businesses going to the wall through no fault of their own, with lost taxes, scarring unemployment and lower growth. In the end, we all pay more for not supporting businesses than we do for doing so.

The initial package of schemes—furlough, grants, loans, deferrals and so on—was welcome, but as time has gone on it has become increasingly clear that those schemes were okay for three months but not designed for the 12 to 18 months of lockdowns and lost trade that we have seen. The gaps at the start have become ever larger, and the debts, overheads and deferrals have mounted, leaving the sectors that are most in distress, such as hospitality, on the brink, facing huge uncertainty on rocky foundations.

It is clear from the Office for Budget Responsibility figures published with the Budget that there is a lack of ambition about the longer-term recovery, with low growth now seemingly accepted by the Government. The Chancellor is betting the farm on consumer spending doing all the heavy lifting. He is taking a big gamble that saving spending alone will drive the recovery. There are only so many haircuts and meals out that people can have in a short space of time, and for many, cuts to family budgets will take money out of local economies anyway. It is as if the Government cannot wait to get off the pitch. Having done the bare minimum to provide a safety net, the aftermath is not of their concern. This is the wrong choice for our economy.

The announcements in the Budget do not mean that the job is done. We saw that in the reaction to the Chancellor’s photo opportunity with a certain celebrity chef, which became his very own kitchen nightmare. There is still huge uncertainty. There is still a looming bombshell facing firms. There are still many hospitality businesses on the brink of going bust, and big gaps in the support for those in the supply chain and those who have been excluded from the start are getting bigger.

Let us take the gaps in support. Businesses could have just about survived them for three months, but are totally desperate after a year and counting. The wedding sector; the events industry; the night-time economy, including taxi drivers and security staff; supply-chain businesses; freelancers; and company directors, including festival organisers and small traders—all have been abandoned. The additional restrictions grant has been too little, too late, caught up in red tape with complicated guidance creating a postcode lottery.

Debt is another issue that is pushing businesses to the edge and threatening the recovery. Companies have taken the loans, deferrals and moratoriums, but as trade slowly restarts and the debts are called in, businesses will go bust. This is an issue for the larger chains as well.

There are also many measures that Ministers have got wrong, making a bad situation worse. Business interruption insurance claims have been the bane of many businesses’ lives, with insurers failing to pay out—if a pandemic is not “business interruption”, what is? The news today that the Government are not prepared to help with insuring large events and festivals is a hammer blow to this summer’s recovery. The Chancellor’s job retention bonus, which businesses were relying on, has now been dumped. With the curfew, the substantial meal rule, and businesses open one day and closed the next, poor decisions have exacerbated the economic woes of the sector. Ministers should learn from these mistakes, but it is clear that they have not. Just yesterday, I was contacted by William Lees-Jones, a Manchester brewer, who rightly complained that there will only be a week’s notice before pubs’ outdoor opening is confirmed, with this being announced on a bank holiday. Hospitality businesses just think the Government do not get their sector.

Although the road map is welcome, it is not a road map for all, and for most is still way too uncertain to plan around: to buy stock, brew beer, bring back staff or book a wedding. The visitor economy is a big part of the hospitality ecosystem—tourism, conferences, events, sports, culture and weddings; for them, the road map still leads to a brick wall. The hospitality industry is vital to the recovery. It drove growth after the global financial crisis and, with the right help, it could do so again. As things stand, the industry will not be able to be the work-horse of job opportunities that it once was, especially for the young. We need a real plan to support hospitality to thrive, with the overhaul of business rates that is long overdue; real action on debts, with loans paid back on an income-contingent basis, as Labour proposes; a proper job support scheme to reduce unemployment and drive growth; powers and resources to reignite our towns, city centres and high streets through a hospitality and high street fightback fund; an extension of al fresco dining measures; more sector support, especially for the wet-led pubs; the freeing up of group businesses and chains from state aid rules when it comes to cash grants; and public health guidance which makes operating viable and is fair to all parts.

Hospitality businesses were the first to feel this crisis and will likely be the last out of it. Firms have seen four winters in a year, and no golden quarter. Every previously viable business that goes bust will lengthen and deepen the long tail of recovery. That is not just the Labour view, but the view of the International Monetary Fund, the Bank of England and the OECD. We have to support businesses today, tomorrow and through the recovery. The truth of the Budget was a Chancellor failing to do enough to stop insolvencies and to support long-term growth—that was the verdict of the OBR. Now, “whatever it takes” must mean just that, otherwise we will see a repeat of the mistakes of the last decade of low growth and stagnant living standards. We cannot afford to go back to business as usual.