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The cause and effect of legislation

Kate Nicholls – ALMR Chief Executive

In keeping with many Londoners, I spend my commute nose deep in a newspaper. And I have begun to notice an increasing trend towards doublethink across the media since I last sat down to write an article for Propel. Newspaper articles expressing concern for the loss of community pubs sit cheek by jowl against those calling for new regulation or more red tape.

Criticism of restaurants and cafes for changes in menu or team rewards sit alongside a cri de coeur for more artisan neighbourhood offerings. The television schedules extol food entrepreneurship, but we don’t like it when it means tough commercial decisions. We may be a nation of foodies, but the media has a distinctly schizophrenic approach to food as a business. I was particularly struck with this when I opened the Evening Standard and saw the same journalist writing two articles – one with the headline “A world with no bars or cafes and no friends is edging closer” and another with “spare us this poverty plea from Costa” – and with no hint of irony or a sense that they might be in any way linked.

In the first article, he bemoaned the march of the machines – automated cocktail mixers, iPads and online ordering at McDonald’s and Tossed – and the consequent lack of human interaction and service. He acknowledged business was tough, both for bars and restaurants – rents are high, rates are high and staff costs are only going one way, meaning productivity savings are essential. He concluded by worrying about the future of hospitality – on the one hand, without productivity savings we may lose more valuable outlets; and, on the other, it may be reduced to “solitary eating and drinking pods where we count the margins and wonder where all our friends have gone”.

In the second article, right alongside the first, he was critical of Whitbread and its subsidiary Costa for voicing concern about the “crippling cost” of the National Living Wage and the fact it might need to put up prices or change staff benefits as a result. If it allowed its workers to share in its growth, he argued, “ordinary people might have more money to spend on cappuccinos in their free time and everyone might benefit long term”.

I put it to him afterwards that his two articles had neatly captured the cause and effect of legislation at the moment and the challenging position in which this puts business. He struggled to see how the two were linked – and explaining that is our challenge as a sector with politicians, the media and the general public as we move into the next challenging period as ever more costs hit the sector.

If you significantly increase costs above what is sustainable, then businesses have to look at productivity across the board. This is not necessarily a bad thing for the economy as a whole – productivity improvement, once a key measure of growth, has yet to recover its level pre the financial crisis of 2007 and the crisis in productivity is the elephant in the room at every Budget – but in a labour intensive business, productivity gains have consequences for employment and people.

The success or failure of any hospitality business is dependent on one thing and one thing only – its people. We don’t sell products and services, we sell hospitality and experience, so there are many things you may be able to skimp on, but your people is not one of them. The idea that, in a highly competitive marketplace, businesses would actively choose to pay people less than they are worth or withhold benefits just doesn’t stack up. But businesses do have to face the commercial facts of life, pay what they can afford and reward their teams in a way that allows them to continue to invest in training, in growth, and in their communities.

The alternative, of course, is ever increasing automation. That may mean an electronic mixologist or it could mean a return to ordering at the bar. In America, it has fuelled the rise of quick-service restaurants and self-service – with up to half as many staff as a result. The World Economic Forum forecasts five million jobs will be lost in the world’s 15 major economies by 2020.

Now, I’m no purist – even Jay Gatsby had an automated cocktail maker and Charles Baker considered the electric hand blender the greatest gift to daiquiri bar rum – but we are all only too familiar with what automation has done to the weekly shop. Retail has seen decimated service and staffing levels and high profile business casualties – in short, a lot of unexpected job seekers in the bagging area.

The chancellor asks for our continued understanding when he makes tough decisions in the light of economic uncertainty and our businesses deserve the same level of support, not castigation, when they make their own tough decisions. Acknowledging cost and seeking ways to mitigate it is not trying to get round legislation, it is trying to protect jobs and hours that may otherwise be lost.

Of course, we can choose not to – but as the Evening Standard journalist noted, that leaves us with a world with no bars or cafes and no friends edging closer.