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Hospitality can help the cost of living crisis, new report finds

Published:  16 March, 2022

A report compiled by UKHospitality and CGA highlights the vulnerable state of the UK’s pubs, bars, restaurants and nightclubs. It also demonstrates how hospitality can help solve the cost of living crisis.

Following the pandemic, the industry has lost nearly a tenth of its licensed premises - 17% of nightclubs were shut down, and 10% of restaurants closed between March 2020 and now. 

In order to survive numerous lockdowns and ever-changing trading regulations, businesses in the sector have had to deplete cash reserves and take on heavy debt.

UKHospitality chief executive, Kate Nicholls, said: “Our analysis shows that the sector will likely be contributing 1.7 percentage points to the national rate of CPI and that the biggest contributing factor will be the planned increase in VAT from 12.5% to 20% this April. 

“This will compound all the other cost increases and further squeeze businesses. With positive action from government, however, such as keeping VAT at 12.5%, the sector can be part of the solution to the cost of living crisis.”

Two years on, and those surviving businesses are facing soaring costs. In addition to rocketing energy prices, operators must contend with a 19% rise in labour costs, a 17% hike in food prices and a 14% growth in drink prices. While many are trying to absorb as much as possible, operators expect to pass on an 11% increase in costs to consumers.

This increase will come at a time when UK consumers are facing their soaring bills. The report shows that 70% of people are now concerned about their long-term finances and 55% are more worried about their finances than they were a year ago. A large majority (85%) are expecting prices in pubs and restaurants to rise this year, which will inevitably result in a drop in footfall and revenue for the sector at a critical time.

Karl Chessell, director for hospitality operators and Food, EMEA, added: “Hospitality businesses now face a variety of new challenges and threats which come at the worst possible time for businesses, and they need sustained help from the government. Hospitality is ideally placed to power the UK’s economic recovery.”

Meanwhile, the CGA Prestige Foodservice Price Index reported a sharp acceleration of price increases during January, with year-on-year inflation of food and drink running at +7.9%, more than twice the rate in December.

For the first time since its inception in 2016, every category in the index showed a month-on-month increase, with food rising +4.4% across the board, compared with a month earlier.

While the impact of Covid-19 on prices has begun to recede, the rising cost of energy, petrol and diesel now dominate. In Britain, Brexit policy has stifled the labour market leading to shortages of products and higher wage costs for food and drink.