According to a recent report on consumer spending from ONS, retail sale volumes continued to recover in March of this year with an increase of 5.4% compared with the previous month. As the UK progresses along the roadmap to recovery and the government are able to reduce social restrictions, the UK’s economy is equally progressing towards recovery with consumer spending already seeing a level 1.6 % higher than February 2020, before the first national lockdown.
The weekend of April 12th saw a dramatic overnight uplift in consumer spending as the reopening of the hospitality industry marked an unforgettable weekend for both consumers and business owners. As the UK approaches the next milestone on the roadmap to recovery, the opening of indoor hospitality on May 17th, many economic sources are anticipating an even greater uplift in consumer spending into the summer months.
The question is, what does this mean for the hospitality sector? This positive trend accumulating towards an ever-increasing measure of consumer spending provides a hopeful outlook for many businesses looking forward to this period of recovery. With the continued reduction to a 5% VAT rate for products and services relating to the hospitality industry, this cut is a welcome boost for the hospitality sector and also demonstrates the governments confidence that recovery in this sector will accelerate the UK’s overall economic recovery. There have been many MPs and organisations such as the ASSC that have lobbied for this reduction to become permanent. This would significantly improve the UK’s price competitiveness for hospitality and enable businesses in this industry to implement more growth strategies and utilise these savings in a manner which bolsters the economy.
This VAT reduction in combination with a surge in consumer spending will consolidate the industry’s return to profit. Statistics from the CGA Business Leaders’ Survey show that in 2019 the hospitality industry experienced a year-on-year growth of 3.9% and a value of £133.5 billion. Data analysts at this time claimed that these figures were on the decline and could reflect an apathetic attitude from consumers frequenting the hospitality industry less. The extensive period of social restriction and the extended closure of the hospitality industry may act as a catalyst for its recovery into the second half of 2021 and beyond. It is a widely acknowledged characteristic od human nature that we do not appreciate something until it is gone. If we apply this psychology to the patterns of recovery that the UK has already experienced in relation to the recovery of the hospitality sector, it is conceivable that the gradual return and reopening of these business venues will generate a renewed uplift in demand and consumer spending.
Furthermore, Brandtrack surveys have shown that nearly half (44%) of consumers perceive holidays in the UK to be a much lower risk than those abroad. This follows suit with the overwhelming demand experienced for accommodation during the summer months in popular coastal or rural locations throughout the UK. A silver lining for the hospitality industry’s recovery may be the attention on what the UK has to offer in terms of summer holiday activities and locations, with many consumers feeling uncertain or unsafe with the prospect of travelling abroad.
The potential growth for this industry in the second half of 2021, and the years following, is immense. Whilst hospitality is far from a consolidated status of recovery, it is certainly progressing towards a path of recovery into profitability. A path which is only likely to accelerate with the further easing of restrictions and increase in market sentiment in the next few weeks.
Statistics taken from these sources: