The National Living Wage: what pub and restaurant groups really think

Leaders of Britain’s pub and restaurant groups have generally welcomed the introduction of the National Living Wage, with a majority saying it will have a positive effect on the market, according to new research from CGA Peach.

In all, 54% said the NLW was a positive change for the eating and drinking-out market, even though a similar number (53%) said it would have a negative impact on their own businesses.

The survey of over 100 senior executives in companies across the sector was carried out in April and May – with some of the findings being featured in last night’s Channel 4 Dispatches programme.

It revealed that a quarter (26%) of groups had already introduced the new wage rates across the board, including for under 25s, while 29% had increased all staff pay to maintain differentials.

However, the research contained a warning for the Government, with 65% maintaining that the stated aim of increasing the base level to £9 an hour by 2020 was simply not realistic.

“Although companies have by and large accepted the introduction of the living wage, there is a real concern that driving it up too fast down the line will put excessive pressure on business, with fears that some will just go bust,” said CGA Peach vice president Peter Martin. “And it has to be remembered that this survey came before last week’s Brexit vote.”

So far, the majority (69%) of pub and restaurant groups have looked to ‘other’ efficiencies’ to help mitigate the impact of an increased pay bill, rather than cutting staff hours or levels or introducing other measures that might affect the customer experience.

While just under half (46%) said they had already passed on costs to customers through price increases, only 24% had cut staff hours and 21% had reduced staffing levels, while 31% changes pay structures to reduce differentials. In all, 15% had employed more staff under 25.

Fewer than 10% had taken more drastic action, such as cutting benefits such as lunch offers (7%), cut training (5%), reduce weekend or bank holiday pay (4%), or cut bonuses (3%).

“There is a realization that in such a competitive market as we have, compromising the customer experience is risky. The public has so much choice, so if they have a worse time or poorer service they can and will go somewhere else,” added Martin.

Looking forward, however, most operators (56%) said they would look to implement staff cuts down the line, with 46% likely to introduce more automation. Nevertheless, the majority (63%) said they did not anticipate that they would have to make job cuts in the next 12 months due to the National Living Wage.

The best thing the Government could do to help the industry to reduce the impact of higher costs was to reduce National Insurance contributions, with 71% agreeing – while 50% wanted a reduction in VAT on food.