Crisis what crisis, part two.

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Last week I circulated a note entitled, “Crisis what crisis?”, outlining concerns about the impending supply and demand side crisis for tourism and the visitor economy.  In that note I said that I doubted Government would be willing or able to offer “hospitality industry” specific support as they did during the pandemic but that was not a good reason, not to press for it.  Indeed, this is what has been happening during the last week or so with, various individual and groups of trade associations raising concerns and making industry specific and more general requests for support to help them through the energy crisis. A crisis that is already biting businesses hard, unlike the domestic consumer energy crisis, the worst of which is still to physically hit or truly dawn on most ordinary consumers.

My rational for suggesting that industry specific support is less likely than in the pandemic is that: there is significantly less fiscal headroom than there was two or more years ago, the scale and direct causes of the difficulties for business are outside Government’s own direct control, there isn’t a direct causal link to the industry’s immediate problems with any Government policy/edicts as there was with the pandemic (we the Government are closing you down from to), the problems faced by “hospitality” on this occasion are pretty much common to every other industry sector and, it is now increasingly likely that the key players in Government, the PM and the Chancellor, could/will be entirely different people, with a potentially differing outlooks on how to bring about urgent economic change.

That said, I do need to clarify, that I was not suggesting for one moment that I think that there will be no general business support, for example, a business energy cap.  Indeed, quite the opposite, I think that there absolutely has to and will be urgent measure brought in to support all businesses, within days of next week’s appointment of a new PM.  Whether those measures prove to be sufficient in their own right, or critically sufficiently flexible to meet our industry’s many peculiarities, remains to be seen.

For these reasons, that it is vitally important that the component parts of tourism and the visitor economy continue to press for targeted measures like: a return to a reduced hospitality VAT rate, further business rate holidays for hospitality and leisure businesses and renewed leeway on when any outstanding tax bills must be settled.  We may yet get special treatment. Equally it’s conceivable that some or all of these measures we propose could be picked up and offered to some or all businesses as a lifeline, regardless of sector. Either way our industry benefits.

I firmly believe that the case for special treatment stands or falls on a proper understanding of the differing seasonal demands, of differing component parts of our industry and the importance of the festive season bounce, in an otherwise long, dark and often difficult winter off-season from November through to the end of March.  It is the arguments around why we need special support, rather than on what specific support is need that I think we and broader destination interests should now be focusing our main efforts on.  The what is needed, is already being more than adequately addressed, jointly and separately by the main business hospitality and leisure representative trade bodies, whose opinion may carry more immediate weight than ours on specific business related measures.

For a flavour of what the business trade associations are currently saying and asking for please see:

UK Hospitality:  https://www.ukhospitality.org.uk/news/615397/UKHOSPITALITY-PREDICTS-WIDESPREAD-BUSINESS-FAILURE-AND-CALLS-ON-GOVERMENT-FOR-ENERGY-COSTS-ACTION.htm

BBPA: https://beerandpub.com/wp-content/uploads/2022/08/BBPA-Board-Letter-to-Prime-Minister_Energy-Costs_August-2022.pd

Joint hospitality letter: https://beerandpub.com/2022/08/15/thousands-of-jobs-and-businesses-at-risk-due-to-cost-of-energy-warn-hospitality-leaders/

BRC: https://brc.org.uk/news/corporate-affairs/shop-prices-hit-new-high/

FSB: https://www.fsb.org.uk/resources-page/energy-help-is-needed-now-small-firms-urge-as-many-struggle-to-get-through-winter.html

Regardless of the support we receive, I remain pessimistic about the prospects of the crisis being resolved in the near future; mitigated yes, solved no. We might not be directly involved in the conflict in Ukraine but for all practical purpose’s Western democracies and Europe in particular, due to its unfortunate recent historic reliance on Russian gas, are effectively engaged in an undeclared economic world war.  Just like the ground war in Ukraine, which is part of the self-same conflict, the economic war and its consequences are in all likelihood going to grind on in one way or other for a number of years, causing all manner of economic casualties and economic collateral damage as it does so.

The alternatives are that one side or the other gives way and gives up on their claim to, or support for, Ukraine in return for an end to economic sanctions and/or free access to affordable energy supplies. Given what has gone on and the truly appalling suffering on the ground to date, that currently seems an improbable outcome. Or in the meantime, we and other parts of the Western World will have to get used to using a lot less energy and/or go elsewhere to find significant new source of supply or new and different types of energy provision to keep things burning and turning. Both could easily take just as long, if not longer to successfully achieve than it will for one side or other to eventually winning or losing the ground war. 

Unlike the early days of the pandemic (or more accurately throughout it?) we shouldn’t be planning, or was it hoping for, a return to “normality” in terms of the next few months, later this year or even next year, but potentially at the very least several years hence and possibly longer.  As I said in my earlier commentary regarding this new and potentially greater crisis we are facing, my advice would be: “Plan for the long-term and for the worst case and sincerely and fervently then hope your wrong”.  

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