Propel Legal Briefing: ‘What is wrong with this country’ by Chris Grunert

First appearing for Propel Hospitality in their Legal Briefing on 14th August2024.

‘What is wrong with this country’ by Chris Grunert

British TV audiences likely found it fitting when they heard John Cleese and Connie Booth’s American tourist character, Mr Hamilton, say to Basil Fawlty: “What’s wrong with this country? You can’t get a drink after three, you can’t eat after nine, is the war still on?”

This line was from the “Waldorf Salad” episode of Fawlty Towers, first aired on 5 March 1979. It resonated with the public following the “Winter of Discontent” (November 1978-February 1979), a time when national morale and the economy were at a low point. Although this line was written more than 45 years ago, and much has changed since then, is there still a metaphorical handbrake on the hospitality sector?

However, nobody can deny that there are whispers of a change in the air and while many expected Labour’s win, the election results were even more decisive than anticipated. The brutal “first past the post” system can be debated (elsewhere by more learned scholars than me, I am sure) but Labour has been presented with a huge mandate and a majority to implement its programme of “change”. A lot is riding on its shoulders, and the sector is waiting with bated breath for the much-needed support from central government. The hospitality sector has the potential to drive incredible innovation, create jobs and generate tax revenue for the country—if equipped with the right tools. But does the hospitality industry have everything it needs, and what has Labour already promised?

Many cities around the world – around 100 – have appointed a “night czar” to boost their night-time economies, but only a few have fully embraced the concept of a 24-hour city. There are cities across the country that proudly label themselves “cities that never sleep”, yet in Central London, patrons can find themselves being ushered out just as they feel like their evening is getting started. 

On the surface it seems clear that extending the hours of the night-time economy could be a positive move. Of course, there are many that would argue that practical challenges of this concept would make this difficult and warn that the drawbacks and potential consequences might outweigh the benefits.
Montreal is on the cusp of introducing its own 24-hour district, joining cities like Berlin and Tokyo that have already implemented such zones. Montreal's current night-time economy reportedly generates £1.28bn with $68.77m in annual tax revenue. Beyond increasing night-time economic activity (and tax revenue), Montreal also hopes to enhance its cultural capital through this initiative.

In England and Wales, the Licensing Act 2003 theoretically provides a flexible framework for 24-hour trading. However, unfortunately due to a mixture of planning restrictions and local policies, it means that in practice this is the exception and not the rule.

Applying for new licences or major variations is still a costly and time-consuming process, often delaying essential capital investments. After putting forward the foundation of an idea, it can take up to six months to bring it to life due to regulatory hurdles such as planning, licensing, building standards, and highways. Each of these steps comes with its own bureaucracy, costs, and delays, and we have even found that local council departments may have competing or even contradictory goals.

While the introduction of the minor variation process was a positive step towards getting small adjustments done quickly, we believe it's time to expand its scope. Why should any proposal be automatically excluded from the minor variation route? Streamlined processes, quicker decisions, and less expensive applications would encourage businesses to take risks and innovate, ultimately leading to business growth and increased tax revenue.

At present the limitations of the minor variation process are artificial. Certain changes are prohibited, regardless of whether they would undermine the licensing objectives. Once an application has been fully considered when the licence is first granted, why is a reduced consultation period and reduced fee not appropriate? One solution would be allowing all variations to be considered in this manner, remove the unilateral refusal power and allow contested applications to be considered before a committee. This would allow the impact of any potential application on the licensing objectives to be fully considered while saving the applicant money and time.

Recently on 30 July, the government announced proposed changes to the national planning policy framework (NPPF) and initiated a public consultation. This eight-week consultation is expected to lead to a revised NPPF by the end of 2024. Labour’s commitment to building more homes is a key focus of these changes, along with promoting economic growth. This focuses on what the government terms as critical infrastructure projects such as freight developments, logistics developments, giga factories and data centres. Unfortunately, the hospitality sector is not given a significant role (if any) in the NPPF despite the fact that we all know how much of an impact hospitality venues have on our economy and the communities that they serve.

In September 2020, changes to planning classes designated all hospitality businesses as “sui generis” (a class of their own). Sui generis properties do not have automatic rights to change use. If you want to alter the use of a sui generis property or switch between different uses, you will usually need to go through the full planning application process and obtain approval from the local authority. This change has reduced the flexibility for hospitality businesses to adapt and evolve. A single “hospitality” use class might not be necessary, but either way removing flexibility entirely can stifle innovation and limit business growth.
The real question is, what does the industry need going forward? Different businesses might have varied opinions on this issue. Proposing a bespoke VAT rate is ambitious, and while some will advocate for it to the government, any reduction in VAT will need to clearly show how it will increase government revenue. The chancellor has indicated that the country's finances are strained, with several important projects already cancelled.

For a city to truly function around the clock, it needs adequate infrastructure, including sufficient policing and public transport to ensure that all patrons can return home safe and sound. In London, the night tube (which has been recently reopened after it was halted during the pandemic) operates on a limited number of lines (Central, Jubilee, Northern, Piccadilly, and Victoria) during Friday and Saturday nights, complementing the existing night-bus service. While it is a most welcomed addition to the night-time transport options, locals will be the first to complain about routes being partially unavailable at night-time leaving some locations completely cut off to the network – and then there are further concerns about safety and violent crime on the lines. Still, the night tube remains an effective example of how to get customers to hospitality areas, showing that a cohesive strategy is crucial.

The success of the night tube should prompt the government, cities, and mayors to seriously consider how to support a 24-hour city. In 2018, the mayor of London shared some notable data with the London Assembly regarding the night tube’s impact on the city’s night-time economy. The night tube boosted London's economy by £171m in its first year and is projected to add £138m annually to London’s economy over the next 30 years. It has also supported more than 3,600 jobs, including 540 within Transport for London. Additionally, London's night-time economy contributes £26.3bn annually and supports one in eight jobs in the city.

Although there will be additional tax revenue, an extended trading period will increase costs for ancillary services, in particular policing costs. 
Streamlining processes, improving infrastructure, and offering targeted support will be crucial in allowing the sector to thrive and contribute significantly to the economy. The government has a long list of work to undertake, but if it’s looking for rapid economic growth, high-quality career opportunities and to lift the nation’s spirit and cultural power, I know an industry that can deliver and should not be overlooked. 

Chris Grunert is a partner at John Gaunt & Partners