The hospitality industry primarily refers to the food and accommodation services industries. This means restaurants, cafes, pubs, bars, catering, hotels, campsites and other accommodation. The hospitality industry has been one of the hardest hit sectors by the pandemic.

Hospitality industry in the UK: pre-pandemic

In 2019 the economic output of the hospitality sector was £59.3 billion, which was around 3% of total UK economic output. Hospitality businesses represented 3-5% of businesses in each country and region.

In the three months to March 2020, there were 2.53 million jobs in the hospitality sector in the UK, representing 7.1% of total UK employment. The hospitality industry has higher proportions of younger workers, foreign-born workers, part-time workers and workers from minority ethnic backgrounds compared to other sectors. Median hourly pay is lower in hospitality compared to other sectors.

The excel sheet attached to this briefing allows users to view the number of accommodation and food/beverage businesses and employment by Parliamentary constituency. The Library briefing on Pub Statistics provides data on the number of pubs by constituency.

Impact of Covid-19

Restrictions on trading disproportionately impacted hospitality businesses.

Restrictions ranged from forced closures and limits on opening hours to factors that affect customer capacity and demand, such as rules on the number of people that can meet indoors and table-service requirements. While forced closures and restrictions limited customer demand and business revenues, hospitality businesses continued to face fixed costs such as certain property and staff costs.

Some hospitality sub-sectors fared better than others. For example, late-night businesses such as nightclubs and businesses in city centres were the hardest hit. Accommodation sub-sectors such as camping and self-catering accommodation benefited from domestic tourism and recovered faster than hotels that rely on international visitors.

Economic output

The hospitality sector saw the biggest economic declines of all sectors during the pandemic. Periods of public health restrictions saw large falls in output.

The peak of the economic downturn was in April 2020, where economic output in the food & accommodation sector was 90% below pre-pandemic levels (February 2020).

Overall, hospitality economic output over 2020 was 42% lower than 2019. In 2021, hospitality output was 21% lower than 2019. The hospitality industry’s share of the UK economy fell from 3% in 2019 to 2% in 2020 and 2021.

Business trading status and resilience

Hospitality businesses reported higher than average proportions of businesses with low profits, cash reserves and business confidence throughout the pandemic.

It isn’t possible to say exactly how many hospitality businesses closed during the pandemic. Between January 2020 and 2021 there was a 10% fall in the total number of hospitality businesses in the UK. This compares with a 7% fall in businesses across all sectors. Looking only at hospitality employers however, there was a 3% increase in the number of businesses.

Labour market

From January-March 2020 to October-December 2021, the number of workers in the sector fell by 90,000 or 3.6%. This compared to a 1.3% decline in jobs across all industries over this period.

The hospitality sector was one of the largest users of the Coronavirus Job Retention Scheme (CJRS or furlough scheme), which played a part in protecting jobs in the sector. In total, across the full length of the scheme, 2.13 million jobs in the hospitality were furloughed, 18% of all furloughed jobs.

As the economy began to re-open in 2021, the hospitality industry began facing staff shortages. For the three months to February 2022, there were 166,000 job vacancies in the hospitality sector, 7.8% of all employee jobs.

There are a multitude of factors leading to high vacancies including: many businesses hiring at once, workers not returning to jobs furloughed and workers having moved away during the pandemic not returning.

Support for the sector during the pandemic

The hospitality industry benefited from business support schemes available to all industries, such as the CJRS and business loans. Hospitality, leisure and retail businesses were also eligible for business rates relief and a series of business grants. Support schemes specifically targeted to the hospitality industry included the Eat Out to Help Out scheme and a temporary cut to VAT.

Other support included temporary changes to alcohol licensing and planning law for pavement licences, to make it easier for restaurants and pubs in England and Wales to seat and serve customers outdoors. The Government has said that its forthcoming Levelling up and Regeneration Bill would make the temporary changes to pavement licences permanent.

Government departments have published strategies relevant to the recovery of the hospitality sector, including:

Outlook for 2022

All coronavirus restrictions were lifted from early 2022 and the hospitality sector continues its recovery, particularly as international tourists return. Consultancy firm Oxford Economics forecast that the hospitality and leisure sectors are expected to be the fasted growing parts of the economy over the next five years. This in part reflects the large ground to be recovered following the pandemic.

Kate Nicholls of trade body UKHospitality has said that hospitality businesses that had survived the pandemic are in “a very precarious state”. She highlighted that hospitality businesses have low profit-margins and have high debt levels following the pandemic. 

Some key remaining business support measures expired at the end of March 2022. In particular, the moratorium on eviction for non-payment of commercial rent and temporary changes to insolvency law. In addition, VAT on hospitality services has returned to the full 20% rate. These factors, along with ongoing challenges such as rising inflation, means further business closures may still yet follow.

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