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Is time running out for the UK’s hospitality industry?

January 2024 has already seen a spate of restaurant closures across the UK, raising questions about whether there is a future for the hospitality sector as we know it.

To say that the last few years have been “difficult” for the hospitality industry would be a gross understatement: Brexit, the Covid-19 pandemic, labour shortages, soaring energy bills, rail strikes and the cost of living crisis have all exacted a heavy toll.

But it seems like things might really come to a head this winter. So far, just one week into the year, a number of high-profile restaurant closures, including that of Sunday Brunch presenter Simon Rimmer, have shown that even long-established businesses are not safe.

One of the most vocal figures to raise awareness of the crisis the industry is facing is Tom Fahey, co-owner of the Isle of Wight’s The Terrace Restaurant (Yarmouth) and The Terrace Rooms & Wine (Ventnor).

Speaking with the drinks business, Fahey explained why recent weeks have been so brutal: “Those that have been on the brink or losing money for some time will have been waiting for any sort of support from the last budget or crossing their fingers for high Christmas trading. When neither materialised what was the point of dragging a loss making business through a lean January made worse by daft campaigns like Veganuary and Dry January. Better to wind up than make things worse.”

Signs before Christmas were promising, especially given how the 2023 festive period was supposed to be the first ‘normal’ one since 2019, without Covid-19 waves or rail strikes to scare punters away. Some operators, such as Fuller’s, saw a booking boom for December.

However, Fahey shared that the cost of living crisis continues to have a significant impact on consumer behaviour, and it is disproportionately affecting independents: “In Yarmouth, at the restaurant, Xmas parties were down 40% on last year. I am unsure exactly how a Christmas uninterrupted by pandemics is ever going to be a lifeline when consumer spending on going out is so comparatively low.”

“We actually did well in Ventnor at the hotel with soup and a toastie for £12,” he continued, “but at that price it’s basically breaking even, so we’re reliant on wine sales.”

Reduced footfall is an issue compounded by rising costs: “Every single cost has increased. Operating at 20% VAT with inputs on which we can’t claim anything back is punishing. No sector should have to endure it. We do everything possible to keep prices at a level that’s accessible for our target market but doing so is an impossible balance. We are being forced to price ourselves out of our demographic which has meant cutting covers, cutting opening hours and cutting staffing while changing our offer to justify the pricing needed to cover wage increases, duty increases, insane utilities and food inflation.”

Prime Minister Rishi Sunak’s highly controversial increase on alcohol duty in the summer has, Fahey revealed, been a major issue for the hotel in Ventnor: “Our sale prices were instantly impacted as we hold tiny amounts of stock whereas supermarket pricing wouldn’t be showing the effect for another quarter. We’re doing everything possible to set prices at a level that won’t alienate, yet in one single swoop the government stops us despite every single voice in the wine trade telling them the new duty scheme was needlessly complex and would only punish wine lovers.”

In addition to supporting the scrapping of the 20% VAT on hospitality (a measure trade body UK Hospitality is also pushing for), Fahey also shared that he was in favour of relaxing immigration rules to help fill the huge number of vacancies. Skilled worker status is being considered for sommeliers, a move which might facilitate granting visas to wine workers.

Asked if he had any faith in the government to resolve these problems, Fahey said: “None. It will take mass closures and even then they will still be too busy playing political games to take any notice of an industry they have zero empathy with and zero respect for.”

Though he shared that his passion to run a hospitality business is un-dented, Fahey has had to adapt to survive: “It’s reminded me that the government likes big business not small business. I accept that and created a stable business I can feel passionate about running in spite of what I’d describe as actively hostile trading policies. I would, however, hugely question the point and viability of running a small, one site restaurant under a traditional model. Rooms or other secondary revenue streams are basically essential.”

Offering his forecast for how the hospitality sector as a whole may look as a result of its current predicament, Fahey said: “I think it will be greatly reduced, and reduced in ways that make it far less varied, accessible and enjoyable than it could be. High-end restaurants will be increasingly unable to operate outside the financial cushion of a large hotel, small restaurants with character will essentially be unviable, pubs will be consolidated into large groups.”

db has previously spoken with Fahey on hospitality topics ranging from TripAdvisor reviews “shutting” restaurants to booking no-shows.

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