Saving the hospitality sector

23 June 2020

There is very little understanding among consumers about how their food is delivered, and greater awareness is needed so that consumers can shop with their conscience

Liz Hind
Editorial credit: Bikeworldtravel / Shutterstock.com

Crises, like the current COVID-19 pandemic, highlight existing inequalities and injustices, but they also tend to accelerate existing social trends. Some of the injustices that we have seen have been heart-breaking such as the unequal death rates according to ethnicity and deprivation. While the loss of life is the most important factor that we must as a society deal with, we must also face up to the realities of who has had to pay for it. Health and the economy are not in competition – this is a false dichotomy. But we must talk about how we can come out of the biggest economic problem for hundreds of years, and who gets to pay for the emergency economic measures that supported jobs and businesses.

The convergence of social inequality, the economic shut down, and the acceleration of social trends is being found most sharply in the hospitality industry. Hospitality has low-paid, insecure staff and predictions about job losses in the industry are dire. Some sectors of hospitality, particularly pubs, were already having problems with many closing down for good before this onset of the crisis. On top of this, there are problems within the industry with tenants having grant money they needed to pay bills being taken on rent for closed pubs, leaving them with little to invest in the measures that they will need to put in place to open safely. Meanwhile, the government is putting pressure on publicans  to open so that they can ‘Save the Summer’ even though they have not issued proper guidelines in time for their proposed opening date, which is the 4th July at the earliest, although earlier dates were mentioned briefly and dropped under public pressure. Anecdotally, under the radar, many pub tenants and leaseholders have already given up for the lack of support and expect not to open again. Business interruption insurance has not covered losses, and we have the spectre of a second wave hanging over us.

The hospitality industry should not be seen as a monolith with a clear set of homogenous business interests. There have been tensions within the industry for years over rent payments, beer-tie pricing, and maintenance costs. This tension has only been exacerbated by the current crisis with many pub owners feeling mistreated with no recourse to fair arbitration. A code of conduct published on the 19th June is voluntary, leading to mistrust by groups representing independent and tenant pub owners.

Recently there have been rumours of government and high-profile hospitality business owners pushing for a relaxation in the social distancing measures. However, the sector includes many small cafes and pubs, who are reporting that trying to open up with while adhering to any social distancing measures will make their businesses unviable. However, the relaxation of these rules will also really help the large brewers, who are at arm’s length from the reality of policing the measures and still trying to run a small business. Pubs do not sell beer, they sell a social environment – brewers sell beer. There is yet to be a serious consultation on the liabilities and concerns of the small operators who lack lobbying power. This lays bare the inequalities of power within business hierarchies, and it will not be until the end of this year that we will fully understand how many businesses the Chancellor has failed to save. Beyond headline grabbing promises of optimism, too many questions are left unheard and unanswered.

This crisis will make hospitality workers and small hospitality businesses ripe for exploitation. Employees and business owners who were already insecure have spent months with reduced or zero income and will now have to try to work in an industry that is forever changed amid the reduced ability for customers to go out and socialise. The furlough scheme is due to be reduced before the hospitality sector is opened properly, which will lead to redundancies as businesses with no profit will have no choice but to remain shut. Employees will then face a job market that does not recognise their skills at a time when we will have increasing mass unemployment.

This leaves hospitality in a precarious position. Customer habits and expectations have changed, and more people will be looking to on-line platforms to fulfil their needs. There will be far less capacity in pubs and restaurants, so people will adjust to staying at home more.

Digital platforms that help people to order deliveries with ease have been growing in popularity for several years. They were a growth industry before the crisis and one that has become invaluable for many during lockdown. One of the most well-known is Deliveroo, who have been taken to court over claims of bogus self-employment. The case was found in favour of Deliveroo because riders for the company could substitute other riders to take their place. This one feature of the employment of riders will mean that they will not get holiday pay, the minimum wage, or pension and social protection contributions.

Deliveroo was a backer of the government’s coronavirus Future Fund that was announced at the beginning of the closure period in April 2020, which would see £500 million invested in UK tech start-ups, with the money announced to be invested in existing companies that have already attracted at least £250,000 in equity investment. There is very little oversight on where this money is going and for what purpose it will be used. Darren Jones, the chair of the BEIS Select Committee has asked for the list of companies who have received funding to be published, but we are still waiting.

Setting up the technology and infrastructure necessary to take advantage of the boom in demand for deliveries is costly and businesses are already strapped for cash and wondering whether they want to continue or to cut their losses. Such businesses are as ripe for exploitation by other businesses that take a part of the profits from a transaction between a consumer and the business that actually produces a meal, product or service – businesses that are already often operating with only tiny profit margins.

There is very little understanding among consumers about how their food is delivered, and greater awareness is needed so that consumers can shop with their conscience. While some online retailers behave responsibly, treat employees well, and pay a fair amount of tax, there are notable exceptions that do not. Greater regulation of the industry may also be required. There also needs to be urgent clarity on the status and rights of self-employed people, and the provision of a minimum wage and basic social protections including paid holidays, sick pay, and pension entitlements. Time is running out if we are to protect people in the storm that we know is coming.