Opinion: Hospitality and tourism – a testing time for North Devon

We have long relied upon a vibrant hospitality, tourism and leisure sector as a key component of the Northern Devon economy. 

Not only does this sector generate significant contributions to economic growth, create jobs and support local suppliers, but invariably is an essential part of our business and community activities. 

This sector has probably been the most seriously affected of all business sectors in the UK economy, with wave after wave of huge disruptions – Covid, energy bills, interest rates etc. 

The latest figures indicate how profound these problems are and how many businesses are quite literally hanging on by their fingernails currently just to survive. 

It is, of course, the worst time of the year for this sector. Between Christmas and Easter is known in the industry as the ‘grave yard’ slot.  There is however no doubt that this year is more challenging than has been experienced for 20 years. 

The general picture makes grim reading. The UK hospitality industry represents more than 130,000 venues. It contributes £93billion a year to the economy. It generates approximately £54billion for the Treasury and employs more than 3.5 million people. 

Across Northern Devon it contributes more than 20 per cent of overall business activity.

The nature of the market has changed dramatically. In the 1970s, pubs, clubs and restaurants had around 90 per cent of the beer trade. This has dropped to just over 40 per cent today. The main reason for this change is the price differential between pubs and supermarkets. 

The latest research from two of the main hospitality industry trade bodies (UK Hospitality and the British Institute of Hospitality), has found that thousands of British pubs, restaurants and hotels have simply run out of cash reserves, leaving them in a ‘perilous state’. 

In practice, this means that around 25 per cent have run out of cash. It is estimated that a further 29 per cent are sitting on less than three months’ worth of cash reserves. Closure rates are therefore accelerating.

Between December 2019 and December 2023 the number of licenced premises fell from 116,203 to 99,113, a net loss of 17,090 venues.  British Hospitality estimate that unless changes are brought in, the closure rates could increase from 2.9 per cent in 2023 to five to six per cent in 2024. 

The ability of the sector to fight back is extremely limited. Bank lending has decreased to a snail’s pace. The banking attitude is influenced by concerns over sluggish economic growth, and the probability that borrowing costs will remain high for much of 2024. 

In reality, banks are already only prepared to lend at figures which, on average, are double the current Bank of England base rate, which is 5.25 per cent. 

Depressing news but we need to face the realities of this. 

The government could step in by addressing the imminent increase in business rates and by cutting excise duty. By far the most popular move from a recent survey, was that the best result could be achieved by lowering the rate of VAT for hospitality.

We do, of course, know that the government’s coffers are already virtually empty. Much as it would be a quick solution to get the Government to respond to this challenge, I do not hold out much hope for any significant changes or handouts in the forthcoming March budget statement.

There is no doubt that the banking industry has a high degree of responsibility here to take a more proactive approach to bank lending.

Too often I am hearing that credit requests are being rejected. On the flip side, however, we are seeing announcements of excessive bank profits being made.

All of this is enabled from the high levels of interest rates and the manipulation of these rates to continue to generate these excessive bank profits.

A concerted lobby on our major banks would undoubtedly be fully justified. We have already made direct overtures to the Bank of England to encourage them to use their considerable muscle power, to improve bank credit arrangements. 

Without this, sadly, many good businesses will be lost. This will also leave many towns, cities and villages without a vital community asset, where people can meet, host events and share enjoyable experiences. 

In general, there is not much more we can do but recognise these huge problems and, where possible, use our local facilities or risk losing them.