Failure to tackle labour shortages will 'stifle' hospitality's recovery

07-Apr-2022 - Last updated on 07-Apr-2022 at 09:13 GMT

UKHospitality has warned that Government failure to tackle 'chronic' labour shortages in hospitality will stifle the sector's pandemic recovery, echoing the wider conclusions of a new report from MPs.

The report, published by the Environment, Food, and Rural Affairs (EFRA) Committee, examined the state of labour shortages in the food and farming sector and found that acute labour shortages caused primarily by Brexit and the Covid-19 pandemic may cause the food sector to face permanent shrinkage.

It warned that a failure to address the shortage will result in wage rises, price increases, reduced competitiveness and increased imports.

“This report echoes the evidence UKHospitality gave to the committee last year, which highlighted that chronic labour shortages – 400,000 vacancies in the sector at the last count – are already harming the attempts of businesses in the sector to rebuild cash reserves and shattered balance sheets,” says Kate Nicholls, chief executive of UKHospitality.

“A failure to tackle the issue now will stifle the sector’s ability to drive the wider economic recovery and we share the committee’s warning that fundamental change is needed to if wage rises are not to trigger significant price increases in the sector, further damaging hopes of recovery.”

In its report, EFRA voiced frustration at the reluctance of Government to engage with the food and farming industry over labour shortages. Despite valiant attempts by the industry, it said ministers failed to understand the issues and even sought to pass the blame onto the sector.

As such, the report urges Government to have a radical rethink to prevent future interventions coming too late.

It suggests that revised immigration measures could address the current crisis. For example, the report calls for a review of the Skilled Workers Visa scheme including the complexity and costs faced by employers and tailoring the English language requirement to meet the needs of the sector.

It continues that while there have been welcome changes to the Seasonal Worker Pilot, the inclusion of the ornamental sector necessitates the Government to make available the extra 10,000 visas ear-marked and for the scheme to be made permanent.

However, it adds that a reliance on overseas labour must be reduced in preference for a long-term labour strategy that grows and develops home-grown talent, combining attractive education and vocational training packages with the deployment of new technology, and the Committee welcomes some of the Government’s work in that area.

“While some of the reforms put forward by Government have helped in the short term, and we agreed that we must look to expand the domestic workforce – this won’t happen overnight,” says Neil Parish MP, Chair of the EFRA Committee.

“In the meantime, it must use the powers available – including over immigration policy - to support the sector. Otherwise we will export our food production and import more of our food.

“Even more importantly, Government must change its attitude to the food and farming sector – trusting them and acting promptly when they raise concerns. Our food and farmers depend on it.”

Nicholls adds that UKHospitality want to work hand-in-hand with the Government to examine, review and reset all the policies the sector had pre-Covid in order to ensure that the immigration, training and skills policies it has now are fit for purpose in a post-pandemic market.

EU staff levels reach new low

The publication of the EFRA Committee's report comes as new data from Fourth reveals that the proportion of EU workers in the UK hospitality industry has dropped to its lowest level since 2019.

Fourth’s data indicates that British workers currently account for 55% of the hospitality workforce, compared to 48% at the end of March 2021 – a seven percentage point increase.

EU workers make up 28% of the workforce, compared to 40% in March 2021; and workers from non-EU countries currently make up 17%, compared to 13% in March 2021. This has been a continuous trend since the outbreak of the pandemic in March 2020, Fourth notes, resulting in an increase in British and non-EU workers in the sector and a decrease in workers from EU countries.

When broken down by sector, the restaurant workforce has seen the biggest shift, with British workers currently making up 52% compared to 41% in March 2021. The proportion of EU workers currently makes up 31%, a significant decrease from 47% last year.

Interestingly, the quick-service restaurant sector has seen a decrease in EU workers but an increase in non-EU workers from the rest of the world, rather than British nationals; the proportion of non-EU workers has increased from 7% in March 2021 to 20% now, while the proportion of EU workers has fallen from 47% to 36%.

Elsewhere, Fourth's data shows the number of hours worked in March 2022 was 12% higher than the month prior (February 2022), but still 12% down on pre-pandemic levels recorded in February 2020.

When breaking down the number of hours worked in March 2022 versus February 2020 by sector, it is evident that pubs have seen the biggest recovery, with hours worked just 4% down on pre-pandemic levels in February 2020. This is followed by QSRs at 8% down; hotels at 11% down; and, finally, restaurants at 16% down.

When looking at staff headcount, there has been a 27% increase in the number of workers currently in the industry compared to March 2021. Encouragingly, Fourth says this is just 12% down on March 2020 – still a decrease, but the least impactful since the outbreak of the pandemic – and 15% down on March 2019.