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The Hospitality Industry as Part of the UK Economy

Introduction

The hospitality industry comprises the accommodation and food service sectors in the United Kingdom. This includes pubs, bars, cafes, hotels, catering, campsites, and restaurants. It is vital to note that the term hospitality is commonly used to include event services and leisure attractions. It is the process through which organizations receive and entertain people by fulfilling their accommodation and culinary needs (Nain, 2018). The hospitality industry makes significant contributions to the growth of the UK’s economy. For instance, in 2019, the industry’s total economic output was estimated at 59.3 billion pounds which accounts for 3% of the UK’s economic output (Hutton & Foley, 2021). It is vital to note that 24% of the output from the industry was seen in London, and 13% was based in the South East (Hutton & Foley, 2021). The hospitality industry is a major contributor to each of the UK’s constituent nations’ economies.

Business and Employment

Businesses facilitate economic growth by generating revenue and providing employment. It is estimated that at the beginning of 2020, the hospitality industry accounted for 223 045 businesses in the United Kingdom, accounting for 3.7% of all businesses in the region (Hutton & Foley, 2021). It is essential to note that a majority of the businesses are small or medium enterprises. It is estimated that in late 2020 the hospitality industry was responsible for 2.38 million jobs which represents 6.9% of the total UK employment rate (Hutton & Foley, 2021). However, the percentage does not represent the number of people in the industry in view of the fact that individuals may hold multiple jobs. The people supported by the sector have increased spending power which supports local industries.

The sector creates opportunities for people in the UK to earn a living. It is vital to note that the number of jobs in the industry rose steadily between March 2011 and March 2020, peaking at 2.53 million, which is the highest number recorded since 1978 (Hutton & Foley, 2021). The hospitality industry is ranked seventh in the UK in terms of job creation according to the Standard Industrial Classification system and is considered the third-largest employer if the broader definition, which includes leisure activities, is adopted (Hutton & Foley, 2021). The industry supports millions of individuals who are empowered to provide a decent living for their families (Jones & Comfort, 2020). The creation of jobs is essential for the economy in view of the fact that the multiplier effect as a result of increased spending encourages growth. In addition, the reduced level of unemployment means the government spends less on supporting the needy and directs funds to promote economic stability.

Economic Growth

The hospitality industry’s impact on UK’s economy is unmatched when compared to other sectors. It is estimated that the industry’s gross value-added, which is the rise in economic value resulting from the generation of products and services, was 5.9% which is almost double that of the entire economy (Davies, 2017). In addition to employing 3.2 million people, the industry added 72 billion pounds to the UK economy and is considered the fastest-growing sector after the region’s crippling economic downturn (Thomsen, 2018). Businesses in the hospitality industry have become active participants in the UK’s stock market. Hotels, for instance, experienced growth and increased trading performance in 2018, which significantly impacted their value (Goldstein, 2017). Participation in the stock market allows institutions in the hospitality industry to raise capital and magnify their investments. The resultant business expansion leads to more jobs and economic growth.

The hospitality industry was among the worst-hit sectors during the Covid-19 pandemic as the UK implemented lockdown measures that saw businesses close down. The hospitality industry is vulnerable to increasingly frequent natural disasters such as pandemics and adverse weather (Dube et al., 2020). There was a noticeable economic decline as a result of minimal business in restaurants and cafés across the region. Data from the Office for National Statistics indicated that the UK’s GDP dropped by 2.6%, with the hospitality industry contributing to a third of the decline at 0.9% (Banks, 2021). The UK Hospitality Quarterly Tracker report indicated that the hospitality industry experienced a 64% decline in sales between April 2020 and March 2021 (Carruthers, 2021). According to UK Hospitality, the 80.8 billion pounds decrease in earnings was equivalent to 220 million pounds lost in sales every day (Carruthers, 2021). This demonstrates the sector’s economic importance and its impact on overall growth. It is vital to note that the hospitality industry generates approximately 130 billion pounds which yields 38 billion pounds in taxes every year (Stone, 2021). The funds generated are then channeled to other areas of the economy to facilitate growth.

The foreign exchange generated from the hospitality industry plays a critical role in strengthening the UK’s financial reserves. As a result, the UK currency’s performance in the international market is boosted, thus stabilizing local economic conditions. It is essential to note that the continued expansion in the industry has attracted significant foreign investment. Global hospitality players are interested in the UK owing to the fact that it has a robust population focused on visiting restaurants, meeting at cafés, and spending time in hotels. The foreign interest peaked after the lifting of lockdown restrictions as the hospitality industry recorded the sharpest rise in output growth as it benefitted from pent-up consumer demand (Wearden, 2021). Increased foreign investment leads to increased employment opportunities, which spur economic growth.

Supporting Other Sectors

The hospitality industry makes immense contributions to the economy by supporting other industries. For instance, it supports the agricultural and food production industry by utilizing products generated from farms and fields. By creating a market for farm produce, hotels, bars, and restaurants are able to purchase commodities consumed by clients in their establishments (Bradley, 2019). The hospitality industry utilizes a variety of items in the provision of services to their clientele. Items such as soap, detergents, furniture, cutlery, furniture, and bedding are supplied by a variety of businesses and manufacturers. The building and construction industry also benefits immensely from the construction of premises as wealthy multinational hospitality companies enter the UK market (Gandhi & Dube, 2020). Hotels, bars, restaurants, and pubs support the retail industry as guests purchase various novelty items in the areas they visit. It is vital to note that the transport sector also benefits by transporting guests to and from various hotels, restaurants, and pubs across the United Kingdom. In essence, indirect jobs are created as a result of the consumption of goods and services associated with the hospitality industry.

The expansion of hospitality-associated businesses leads to significant infrastructural improvements. It is essential to note that hospitality is inextricably linked to aesthetics. Therefore, hotels invest significantly in appealing buildings, quality access roads, and manicured surroundings. The improved infrastructure serves to attract other businesses such as retail investors and transport companies. In addition, the application of innovative technologies and the adoption of business models designed to revolutionize the industry have led to the creation of opportunities for technology companies and advertising firms, respectively (Jones et al., 2017). Other beneficiaries are ticketing companies in the UK which have experienced a 1000% rise in bookings as restrictions are lifted as a result of increased demand (Sweney, 2021). The increased activity in the locations that serve food and offer accommodation leads to the creation of job opportunities that lead to increased income generation, which is necessary to support the economy.

Conclusion

The hospitality industry is a major determinant of a country’s economic success. In the United Kingdom, the sector is a major source of employment opportunities for small and medium enterprise businesses. The jobs created are a source of income for the region’s population, who are empowered to provide for their families and lead decent lives. It is vital to note that the people’s increased spending power results in a multiplier effect, which encourages economic growth. In addition, the sector’s contributions to the UK’s gross domestic product and gross value added ratios demonstrate its impact on overall economic health. The hospitality industry’s support of other sectors of the economy such as agriculture, food production, transport, and the technology industry leads to the creation of jobs that support the UK’s economy. The hospitality industry is an integral part of life in the UK because it determines the health of its economy.

References

Banks, C. (2021). GDP figures highlight the economic importance of hospitality. UKHospitality.

Bradley, K. (2019). Five different ways hotels can work to boost the local economy. Green Lodging News.

Carruthers, N. (2021). UK hospitality sector suffers £80.8bn loss. The Spirits Business.

Davies, P. (2017). Hospitality’s contribution to the UK economy outpaces other sectors. Travel Weekly.

Dube, K., Nhamo, G., & Chikodzi, D. (2020). COVID-19 cripples the global restaurant and hospitality industry. Current Issues in Tourism, 24(11), 1487–1490.

Gandhi, A., & Dube, L. (2020). Can hotels create convergence economies? Hospitality Net.

Goldstein, P. (2017). UK hotel trading performance review. Knight Frank.

Hutton, G., & Foley, N. (2021). Hospitality industry and Covid-19. In House of Commons Library (Issue CBP 9111).

Jones, P., & Comfort, D. (2020). The COVID-19 crisis and sustainability in the hospitality industry. International Journal of Contemporary Hospitality Management, 32(10), 3037–3050.

Jones, P., Comfort, D., & Hillier, D. (2017). A commentary on pop-up shops in the UK. Property Management, 35(5), 545–553.

Nain, A. (2018). A study on major challenges faced by the hotel industry globally. International Journal of Creative Research Thoughts, 6(1), 566.

Stone, S. (2021). How important is hospitality to the economy? The Morning Advertiser.

Sweney, M. (2021). Severe staff shortages hit UK hospitality venues amid huge rise in bookings. The Guardian.

Thomsen, P. (2018). The £130 Billion hospitality sector was celebrated at the inaugural conference. UKHospitality.

Wearden, G. (2021). UK economy accelerates as tourism and hospitality emerge from lockdown. The Guardian.

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StudyKraken. "The Hospitality Industry as Part of the UK Economy." January 5, 2023. https://studykraken.com/the-hospitality-industry-as-part-of-the-uk-economy/.

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StudyKraken. 2023. "The Hospitality Industry as Part of the UK Economy." January 5, 2023. https://studykraken.com/the-hospitality-industry-as-part-of-the-uk-economy/.

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StudyKraken. (2023) 'The Hospitality Industry as Part of the UK Economy'. 5 January.

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