AHC Speaker Interview: Simon French, Chief Economist, Panmure Gordon

18 June 2019

Simon French is the Chief Economist at the UK merchant bank, Panmure Gordon & Company. He is a Top-5 ranked economist in the City’s Extel rankings and writes a monthly column for The Times newspaper. Prior to joining Panmure Gordon, he was a Senior Civil Servant, latterly at the Cabinet Office as Chief of Staff to the UK Government’s Chief Operating Officer. He holds Undergraduate and Postgraduate degrees in Economics & Finance from Durham University and is a member of the Government Economic Service and the Society of Professional Economists. 

He embraces early mornings, plays cricket in his downtime and is perfectly happy to natter to cheery conference organisers. So, we sat down with Simon in an attempt to put the (hospitality) world to rights …

The AHC: Let’s start with an easy one … how is the economy looking from where you are?

Simon French (SF): Since the Brexit referendum, the UK has been on the naughty step with international investors. US investors are not allocating money into the UK at the same levels as usual and won’t change this approach until Brexit has a resolution. Having said that, there is still a massive weight of global capital chasing alternative models, such as fixed assets with reliable yields like hotels, hostels, etc so the hospitality industry is in a good position to retain inward investment. 

I think the global yield compression has further to run, and lowering government yields will drag down yields in corporate debt markets. Asset values will likely hold though as low-interest rates will continue to support selling prices. Part of the reason that interest rates are unlikely to rise is that public spending on Health, Education and Defence would be the areas to suffer as the government will have to find money from these budgets to pay the increased interest bills.

Ironically, given my opening sentence, I am one of the City economists most sanguine about Brexit. Whilst the uncertainty surrounding the EU is having a near term negative impact, the UK economy is flexible enough to adapt to any changes that eventually materialise. I bet you’re grateful you chose me now!

The AHC: We’re hopeful that the depleting numbers of retail workers could be re-deployed into the hospitality sector, solving the impending labour issue and seeing us all home in time for a hot bath and crumpets. What say you?

SF: Ha! An admirable solution. Unfortunately, those workers leaving the retail sector are going to be in high demand given the high level of vacancies in the digital sector or construction industry. Hospitality must get used to competing for workers in an increasingly tight labour market.

Where the hospitality industry would be wise to look is the +55-year-old segment of the workforce. These baby boomers are keen to keep working in large numbers as they are living longer, remaining healthy and increasingly unsure over the value of their pensions. This age group is a massive growth area with approximately 6.5m (20%) of the workforce fitting into this segment – this will only increase over the coming years. However, their requirements are often flexible, part-time working. Not an impossibility for the hospitality industry but it will require a shift in mindset and practise for employers, both in hospitality and other sectors, to recruit in this area of the labour market.

The AHC: Automation … friend or foe?

SF: That very much depends on your viewpoint, and mine draws on the UK’s recent experience of carwashes. Let me explain. Since 2008 the UK has experienced a real wage decline which has essentially created an environment where workers are becoming relatively cheaper to employ than capital. There are now more manual car washes in the UK than automated ones compared with ten years ago - as it costs less to pay manual car washers than it does to raise the capital, build the structure, install the technology and keep the automated car-wash system operating. This is an example of an industry that is being de-automated but also poses a wider question in relation to productivity. Overall automation presents huge productivity opportunities for the economy.

The challenge that comes with automation is to ensure that workers’ skills keep pace with our changing economy so they can be a complement to automation – rather than having to accept lower wages to compete with the robots!

The AHC: So, how does this Brexit saga end?

SF: Assuming Boris Johnson becomes the next Prime Minister, I think he will attempt to put forward a no-deal Brexit which will be blocked by Parliament. This will likely lead to a second referendum in October with remain, no-deal and a version of the withdrawal agreement being the options on the ballot paper. I think the withdrawal agreement will be the most popular outcome – but so much hinges on how this choice is presented to the electorate.

Assuming the UK does end up leaving the EU, we will spend much of the next decade negotiating trade deals and regulatory agreements with various countries across the world. Parliamentary bandwidth, currently consumed by Brexit, will remain saturated for many years to come. 

And on that cheery note … see you at The AHC. Given the current pace of change at Westminster, I’ll be writing my presentation the day to ensure it’s as current as possible! 

Simon will be delivering the Economic Overview - Walking on Broken Glass (“walking on, walking on … ” yup, that ditty will now be in your head for the rest of the day. You’re welcome) on Wednesday 9th October at 10:40am - 11:00am. Join him, us and a host of other charming people for The AHC 2019.

If you are a hotel operator, you are likely to be eligible for the Hotelier Rate of £250.00 plus VAT to attend The AHC on the 9-10th October 2019. This rate is available to owners of up to ten self-operated properties. Please email with details of your properties to request this rate.