17 Jul 2013

The taste of success: is food the key to economic growth?

Unemployment down, job vacancies up: good news for some, especially the food industry which is now Britain’s biggest private sector employer. So why is it so hard to get businesses off the ground?

Chef making canapes (getty)

The food industry is booming: we all need to eat, and even in the most challenging economic times the hospitality sector is growing fast. It now accounts for one in seven jobs and employs more than three and a half million people.

And that means big money too. The food industry contributes around £25bn to the British economy, while the number of restaurants has soared by 25 per cent over the last year.

The boom has not just meant more jobs and opportunities to learn new skills: many of the new businesses have breathed new life into forgotten areas, while food tourism attracts millions of foreign visitors to the country.

But hard-pressed entrepreneurs say it is still unneccessarily difficult to get a food start-up off the ground.

A new report by the company Kitchenette, which provides support, training and financial resources to nascent food businesses, is calling on local and central government to help, by reducing red tape.

Food is unique because it intersects some of the most critical issues of our times: jobs and employment, urban regeneration, the environment, poverty, nutrition and public health, says Geoff Mulgan, who heads the charity Nesta.

Market forces

Like the arts, he says, food has become part of how cities animate themselves and celebrate their own diversity. Thinking creatively about how best to exploit that, he says, is essential. He mentions a project in Stoke, where a large plot of land is being turned into England’s biggest urban farm, surrounded by cafes and restaurants.

It aims to become a hub of the local community, part of a regeneration strategy for a once depressed area. Not just a place to grow food and to meet, but a place which should generate new jobs, apprenticeships, and small business opportunities.

The UK has started looking abroad, to emulate the thriving food markets on the continent. Petra Barran, from the street food co-operative Kerb, says a market pitch offers one of the lowest barriers to entry for small start ups.

“They offer the most amazing platform for people to get involved, try new ideas and feel part of a community”, she says. Just as importantly, markets can re-establish a supply chain between local people and suppliers, from farms to producers: another source of employment.

At the moment, though, waiting lists for pitches can take years, while outdated regulations often impose arbitrary restrictions on where and when hot food and drinks can be served.

Yianni Papoutsis now runs three successful London restaurants, and is opening another later this year in Brighton, but his gourmet version of the humble burger began life in a van he picked up for a couple of thousand pounds.

From burger van to restaurateur

He put the word out on social media sites like Twitter, and without the need for an expensive branding or marketing budget, the crowds kept on coming. His next venture was a pop-up restaurant, which he managed to set up just eleven days after coming up with the idea.

The queues which formed became legendary: the pop-up became permanent, and eventually turned into three permanent sites. Papoutsis has now become a byword for success, but he says it was certainly not an easy way to start a business.

“It’s been three years, with virtually no money”, he says, “and it’s been a struggle. In future, entrepreneurs should really have it easier, there ought to be less bureaucracy – at the moment there are so many disparate regulations.”

And finding more long-term funding was also a key barrier. “Banks just don’t lend money to small businesses nowadays, let alone food and drink start-ups”.

Papoutsis managed to use his life savings to finance his venture, but the innovative chefs’ collective, the Young Turks, managed to source cash via more unorthodox means, turning to crowdfunding to help set up their restaurant in East London.

Using the platform Crowdcube, they managed to secure well over the £250,000 they needed for a 25 per cent stake in their company. It has been enough to allow them to go ahead with plans to open another two restaurants over the next five years.

They admit, however, that the support of their local authority was crucial: “Lots of other people struggle without the kind of support we got from them”, they told Kitchenette.

Banks just don’t lend money to small businesses nowadays, let alone food and drink start-ups. Yianni Papoutsis, burger entrepreneur

It is why Kitchenette has appealed to councils and government to follow similar examples of best practice. For a start-up to have a real chance of succeeding, they say, takes real commitment, plus official backing.

They are calling for better access to finance, to help budding entrepreneurs turn their dreams into a reality. Incentives, from lower rates for loans, to mentoring schemes, would be a start, as well as new ways to share resources.

And they want simpler regulations and smart planning decisons, designed to allow people to innovate, instead of tying them up in reams of paperwork. Without fundamental changes, too many businesses are doomed to fail, they say – and how many of them could have been the next Pret a Manger?

Jobs, training and opportunity – the food industry is already forging ahead.

Now, the start-up pioneers at the cutting edge say it’s businesses like theirs which could hold the key to sustainable economic growth.