By Kunal Sawhney, CEO of Kalkine (www.kalkine.co.uk)
The average wage growth in the UK is not keeping up with the sharply rising cost of living, leaving workers facing the biggest annual fall in living standards since records began in the 1950s.
Staff shortage, Brexit, pandemic, HGV driver crisis and skyrocketing inflation are some huge headwinds that the UK hospitality sector faced over the last two years and each of these has had a significant impact on the operations of the hospitality businesses. Even though all the Covid restrictions have been eased, many businesses are still closed or operating fewer hours due to rising staff shortages. In an attempt to attract workers and retain existing staff, employers are hiking bonuses, but the sector is yet to show any progress as such.
Share of EU workers falls
In the last two years, the pandemic and Brexit together have created many hurdles for the hospitality sector in the UK, as the share of workers from the European Union (EU) has fallen to its lowest level since 2019. The hotels, restaurants, and pubs are now struggling to afford pay hikes for domestic workers as they are still recovering from the impact of the pandemic.
Further, recruiting workers with no experience and adapting to their needs has put more responsibility on experienced employees.
The overall number of workers in the sector has fallen by 12% since the start of the pandemic. According to the government data, around 1.3 million EU workers left during the pandemic, and almost 100,000 EU citizens had left accommodation and food services in the two years to June 2021.
Hospitality sector analysis company Fourth said that the percentage of EU workers in the UK hospitality sector has fallen to 28% from 42% before the pandemic. The number of British employees working in hospitality venues has risen to 55% from 46%.
At present, the UK hospitality sector is facing immense pressure to pay off pandemic-related debts, with soaring energy, food, and wage costs as various government support programmes and bankruptcy protection have ended in April.
Hurdles and challenges
Hospitality businesses in the UK have already warned of the rise in prices for customers due to soaring costs and a hike in VAT charges from 12.5% to 20%. The VAT cut was introduced by the Boris Johnson government to help the sector deal with the impact of the pandemic. The rate was partially restored to 12.5% in October 2021 and was scheduled to return to 20% from 1 April.
According to trade body UKHospitality, the sector will soon be hit with soaring inflation. The businesses are reportedly facing a year-on-year hike of 19% in labour costs, 95% in energy bills, 14% on drinks, and 17% in food prices, leaving them with no choice but to pass on price rises to the customers.
From April 2022, the National Minimum Wage and National Living Wage have also seen a rise, giving about 2.5 million workers an annual pay rise of around £1,000 a year. This has put an added strain on the business owners as labour costs will further rise.
At present, the UK hospitality sector is trying hard to recover from slumps without much support from the UK government despite challenges such as immense inflationary pressure and rising bills. Soaring food, energy, and other costs along with rising debt and low revenue may not allow the businesses to go for hikes in wages to attract new workers and retain existing staff.
The soaring energy bills are forcing hospitality firms to raise prices, cut operating hours, and reduce gas and electricity usage. However, it will make the sector incompetent in comparison to other nations, with dampening demand and a heavy debt burden. Going ahead, the sector has to review its traditional hiring process with proper advertising of vacancies, a better working environment and of course, some possible incentives to attract talent.