Hospitality and Productiveness

An area of significant growth within the 'dominant services sector of the British economy' is designated as Hospitality. This covers hotels, restaurants, pubs, cafes and all such outlets; which directly employ 3.2 million people, supported by 2.8 million people who work in support and supply trades to the sector. Thus six million households are wholly or partially maintained by the business. The trade association for the sector, the British Hospitality Association, has undertaken studies that show that the sector is well spread across the whole country, with Hospitality constituting a top-six employer in every region of the United Kingdom.

It is also a sector that has defied the general sluggishness of the British economy since 2008. The increase in output measured over the period is 5.9%, double performance of the whole economy. Labour productivity [measured as gross 'value added' per hour] is around 3.2%, which compares favourably with the shameful national figure for the whole economy of only 1.5%. The sector paid £38 billion in direct taxes and claimed to have brought £161 billion of turnover into the economy in 2016.

The sector also displays many of the structural weaknesses to which the British economy is prone. It is very heavily dependent on low-paid labour, much of which is recruited from abroad: mostly from the European Union and the Commonwealth. This is obvious in the patchy linguistic skills of the staff, where more 'white Europeans' are in front-line jobs, with a higher concentration of non-white people as cleaners, kitchen porters etc. There is very considerable use of casual staff on very uncertain contracts, who receive low wages and thus make little contribution to the buoyant consumer demand on which the momentum of the economy depends. The British Hospitality Association emphasises that there is great potential for growth in the sector, so long as foreign travelers are attracted to the many well-marketed natural and urban assets that Britain and Ireland have to offer, and so long as the resident population have sufficient incomes to enable them to use catering and related facilities. If the now-evident slowdown in the real earnings of the nation at large continues, it will impact disproportionately heavily on the hospitality sector as people buy ready meals and take drinks home from the supermarket rather than eat and drink out.

Over the past twenty years hundreds of pubs have closed in every part of the country as social habits have changed. It is increasingly unacceptable for chauvinist husbands to leave their wives at home with the television and the children and cups of tea, while they booze with their cronies several nights weekly. Couples, often with their children, dine out together; though it is notable that many families sit as three or more isolated individuals who are communicating with different sectors of the games business, or with different contacts, even as they eat: so they may just as well stay at home where the kids could access 'unsuitable' sites from the bedrooms. It is little hardship to a family to cut out a restaurant meal when economy is forced on the household budget; but the negative impact of that happening a million times to the hospitality business is huge. Supermarket takings increase, and more pubs close.

To preserve their market, the better-designed and best-located pubs are moved upmarket as dining and drinking establishments; and, increasingly, managers are deterring 'traditional drinkers' from occupying floor space in 'gastropubs'. Significant investments are being made in the physical plant and in the image of selected catering outlets: and this requires the 'right sort of customer' to be attracted to them: people with sufficient money to provide a return on the investment [in premises, staff and the offering that is made] and who have the inclination to use just that sort of outlet. So this enhances the need for specialisation, branding, image-building and the need to advertise; which also require heavy investment. The returns that come to successful outlets are increased turnover, higher productivity from staff and increased productiveness which justifies constant further investment. A very few pubs survive as retrospective examples of the 'spit and sawdust' image of hostelries: though sawdust is not welcome on customers' shoes and most people would deeply be offended by any use of spittoons: it is a very subtle job to make an 'olde Englishe pub' attractive to capable consumers.

Rates of Interest 2

The present situation in the UK, where there is effectively no interest rate, leaves a free-for-all in financial markets. Mortgage lenders are able to raise cash at very low rates of interest, and lend it on to intending homebuyers at rates which are very much lower than those which prevailed in the years down to 2007. The Bank of England has several times become concerned at the amount of lending that is being advanced against peoples' homes, because they are aware that a collapse of property prices would leave millions of households in a situation of 'negative equity', where they owe much more in the debt that they took on to buy their home that they could get from selling the house. Thus the Bank and the government ask the lenders [principally, banks and building societies] to limit the amount that they lend. This limitation is set on the aggregate of money advanced to all home purchasers, rather than on categories of property or classes of home buyers [such as the young, or people of limited means].

Alongside the mountain of debt that house-buyers have been allowed to accumulate, the same people have been encouraged to borrow to maintain their standard of living as real wages have declined for the majority of the population; hence the amount of unsecured debt [that which is not 'covered' by the 'value' of the borrowers' material assets] has escalated alongside mortgage debt. In the bizarre Britain that has been created since 2008, sales in the shops largely depend on the customers borrowing a significant  proportion of what they spend. Thus Economists on the television tell citizens that the 'dominant service sector' of the economy is what 'drives' the growth of the system. So when government representatives talk about the UK as a successful, growing economy; indeed as the 'world's fifth-largest economy'; they are talking about a reckless growth of debt owed by the British people to the financial system and to the foreign firms that are prepared to advance credit to British firms and institutions. The whole thing is unsustainable; and unless rational economic policies are explained to the electorate, and adopted by them, a crash much more catastrophic that that of 2007-8, or that which followed the 'Wall Street crash' of 1929.

As the country most addicted to debt, we can be sure that the United Kingdom will suffer more than others when the inevitable crash occurs.