Richard Brown: Hard times ahead for London’s crucial hospitality sector

After Boris Johnson’s election victory in December 2019, some of his supporters heralded the approach of another “Roaring Twenties”. 

With hindsight, it was an unfortunate analogy, for the 1920s boom followed the devastation of World War I and an influenza pandemic that killed 50 million people worldwide. But the comparison has stuck, and as we look nervously but hopefully into 2021, even sober-minded think tanks such as the Resolution Foundation are deploying it, predicting a boom in deferred expenditure, particularly in the hospitality sector, once vaccines have enabled social mixing to return to something like normal.

Anecdote bears this out, as those friends who are still in work discuss which restaurants and bars they will visit – we are all planning to get “lit up in London”. But the capital’s hospitality sector is a lot more than the subject of lockdown fantasies. Over the last ten years, employment in the sector has grown by 40%, which is faster than any other apart from professional services, IT and communications. 

This growth is driven by and supports London’s global role. Spending by overseas visitors forms a major chunk of London’s exports, and it is London’s cultural offer – from nightlife to galleries to restaurants – that helps the city to retain its position at the top of global surveys, such as this year’s Global Power City Index, published by Tokyo’s Mori Memorial Foundation. Hospitality isn’t the froth on the top of “serious” sectors, such as financial and business services. It is foundational to them.

And as we lose the advantages of access to the European Single Market, these “soft power” assets will assume ever more importance in bringing the world to London, enabling us to play our part in “Global Britain” – another phrase that has taken a battering in this year of mutating viruses, lockdowns and travel bans.

But hospitality has been hit hard by the coronavirus crisis. The sector accounts for around 25% of current furloughs (compared to less than 8% of jobs), and has seen the most substantial job losses of any industry. And the outlook is grim: recent national surveys suggest that almost 30% of pubs and bars are pessimistic about surviving into the spring. London’s pubs and restaurants had a particularly tough year, with visits to the city centre dramatically reduced even during the summer period of relaxed restrictions.

As ever, the situation is complicated by Brexit. London’s hospitality sector is particularly reliant on foreign workers, with overseas nationals comprising around 50 per cent of the workforce. New immigration rules will make it far harder to employ foreign nationals in hospitality. Managers and a few specialist roles such as chefs are classified as “skilled” and therefore eligible for work visas but, bar staff, waiters, baristas and other hotel and kitchen staff are not.

Furthermore, the coronavirus crisis appears to have triggered the type of exodus that many were predicting (but failed to materialise) after the EU referendum in 2016. More than 700,000 people born outside the UK (around 500,000 from the EU) left employment between the first and third quarters of this year, according government surveys. Most appear to have left the country (or at least the survey sample) entirely. They may be biding their time until London re-opens, or they may stay away.

So, come the great unlocking, London’s hospitality sector may be in the unhappy situation of experiencing business closures and labour shortages at the same time – just as the city is trying to renew its global appeal. There may be an opportunity here for unemployed young Londoners to pick up the slack. But that is likely to put – long overdue – upwards pressure on wages and working conditions, which may in turn threaten the viability of pubs and restaurants facing higher food costs and already financially scarred by the coronavirus winter.

London will re-open, and its restaurants and bars will once again buzz with life, as they fill with people from across the city, the nation and the world, underpinning London’s status as a global meeting place. But recovery will be tough for the hospitality sector, and it could need almost as much support as during the long winter of coronavirus closures.

Richard Brown is deputy director at think tank Centre For London. Follow him on Twitter.

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