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UK Restaurant openings at risk of outgrowing supply of skilled labour

Tags: Hospitality, blog

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There’s no doubt the UK’s economy has benefited from a booming Hospitality and Catering market! According to recent statistics from the British Hospitality Association, the UK’s Hospitality industry currently represents approximately 3 million workers and a tenth of the UK’s wealth.

While the rapid growth of the UK’s restaurant sector is reflective of the overall profitability of the Hospitality industry to the economy, the current shortfall of skilled labour combined with the looming uncertainty of Brexit begs the question – ‘Could the high volume of restaurant openings outgrow the supply of skilled labour?’ In this blog, we investigate.

The rapid growth of the UK's restaurant market

Since 2012 a net average of 743 new units opened per year, but according to statistics published by www.bighospitality.co.uk in September last year, that figure nearly doubled to 1,333 over the course of 2017, an increase of 44 percent.

Unsurprisingly, restaurant chains are a major player in the world of casual dining. However, young and ambitious restaurants are opening at a phenomenal rate, with certain cuisines becoming far more easily accessible within casual dining scene. This reflected in the report, which showed that restaurants and bars saw the biggest net increases (+210 sites), with a rise in vegan, Jamaican, Caribbean, Turkish and American cuisine.

While it’s certainly good news how so many new restaurants are becoming available to the market, the increase in job openings which can be attributed to the rapid growth of the industry appears to be outpacing both the supply of skills and consumer demand. By creating a shortage of chefs and managers with specificity required for the range of entry to senior level roles, it would appear that restaurants are becoming victims of their own success. Add the uncertainty of how Brexit will likely impact immigration and the wider economy to the mix, and it’s hardly surprising that we are also seeing a substantial number of restaurant closures too.

The research highlighted that the number of pubs (-254), Indian restaurants (-79) and Chinese restaurants (-62) all declined. The UK’s curry sector has been hit by an ongoing shortage of skilled chefs, which experts from the Bangladesh Caterers Association predict could lead to a number of 10 to 15 Indian restaurants closing per week.

Meanwhile, the MCA Market Report cautions that the influx of new restaurant openings is outstripping consumer demand. The research showed that independent restaurants make up 68 percent of restaurant sales and 84 percent of outlets, accounting for £13.5bn of sales, yet remain in decline as brands expand and cost pressures come to bear. Furthermore, branded restaurants account for only £5.7bn of sales, which is 28 percent of market sales and 15 percent of outlets. These brands have been growing in outlet numbers and turnover, but at a more subdued rate than previous years.

The report also revealed that profit margins were expected to decrease from 2017 to 2018 as cost pressures intensify and demand remains restrained. Branded restaurants were expected to see continued subdued growth over the next few years, with turnover growth of 4.3 percent per year between 2017 and 2020, down from 5.6 percent between 2014 and 2017.

Consumer spending habits in the face of economic pressure

Due to a variety of factors, such as the rising cost of living in comparison to a slowdown in salary increases, consumer spending has lowered substantially. Simon Oaten, partner for hospitality and leisure at Deloitte, said: “The combination of rising inflation and lower wage growth is stretching disposable incomes and causing consumers to rethink their expenditure. It is no surprise that we are seeing UK consumers tightening their belts.”

That being said however, research from technology payment company, Visa showed a shift in spending habits, whereby consumers displayed a growing appetite to invest in leisure activities as opposed to physical items. Although the report highlighted 2017 as the worst year for overall consumer spending since 2012, expenditure in hotels, restaurants and bars increased by 4.7 percent on top of a 4.1 percent rise in 2016.

Brexit and the demand for skills

Ever contentious, the murky waters of uncertainty surrounding Brexit has resulted in the prediction that the hospitality sector could potentially face a shortfall of 60,000 workers per year if immigration from the European Union is too tightly controlled. This means that thousands of businesses are facing the prospect of drastically reducing their dependence on EU migrant workers.

As it stands currently, EU citizens make up a quarter of the 3 million workers in hospitality, according to a report by professional services firm KPMG. That includes 75 percent of waiting staff and 25 percent of chefs. As the clock ticks down to Britain’s departure from the EU, senior figures in Britain’s hospitality sector are warning that staff shortages brought about by an exodus of European workers, and a dearth of new arrivals post-Brexit, is a crisis in the making for an industry that is Britain’s fourth-biggest employer.

While many have suggested that the government should provide preferential access for EU citizens pursuing a UK-based hospitality career, the reality is that the industry cannot rely on verbal commitment from the government or their potential initiatives alone. Instead, employers should prepare themselves for any outcome by proactively implementing strategies - such as apprenticeships, internal up-skilling initiatives, flexible working opportunities etc - to attract and retain individuals within the existing population. 

To mirror the sentiments so eloquently expressed by Gordon Ramsay - who has vocally embraced the concept of the ‘modern apprenticeship’ - Brexit might just be the kick up the backside that the industry needs.

Stay tuned for our blog on how to attract and retain restaurant staff!

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