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Hospitality leaders hold on to optimism as inflation slows

Published:  20 September, 2023

Confidence is rising slightly among hospitality owners, new data suggest, despite inflation slowing at a ‘glacial’ pace and economic pressures in the offing, which could potentially leave the sector with a ‘billion-pound bill’.

The ONS reported a slight drop in inflation today (20 September), from 6.8% in July to 6.7% in August. This decrease brings inflation to its lowest level in 16 months, with the fall in food and drink prices the main contributing factors.

UK Hospitality (UKH) described the UK’s overall inflation as ‘stubborn’. Chief executive Kate Nicholls is now calling for more support from government as other pressures loom.

“In the current economic climate, rates rising with inflation, coupled with reliefs ending, would be catastrophic for businesses. It is unthinkable for the government to press ahead with its current plans, which will mean an almost billion-pound bill for the sector. A commitment from the government to freeze the business rates multiplier and commit to an extension of business rates relief is needed as soon as possible,” she said.

Elsewhere, data suggests that optimism has improved slightly among hospitality leaders.

According to the new Top of Mind Report 2023 from Lumina Intelligence, a quarter of on-trade businesses report a slight growth in optimism for the remainder of the year and expect trading conditions to improve as consumers start to enjoy more discretionary spend.

Key to this is the easing in inflation, albeit slowly.

While challenging trading conditions are largely expected to continue into the next 12 months, hospitality leaders remain cautious, with the hoped-for reduction in inflation expected to be small and slow.

In a further key finding, ‘value consciousness’ was identified as a growing trend, as the squeeze on household budgets continues to impact consumers. This trend is taking priority at the expense of ethical consumerism, which has seen a marked decline this year.

The proportion of both off and on-trade businesses facing challenges in attracting and recruiting staff has also declined over the past year. Lumina puts this decline at -8ppts and -10ppts respectively YOY, though in hospitality specifically, 70% of leaders say they are still facing challenges.

Over a fifth of business leaders cited shifting attitudes within the workforce as a reason for staffing difficulties, with potential employees favouring flexible roles.

Food and drink inflation remain as two of the key contributors to UK inflation. Today’s figures reveal the extent to which these sectors have a fundamental impact on inflation rates, carrying the highest annual rate of price rises over the past year.

“Inflation slowing at a glacial rate will leave hospitality businesses incredibly concerned ahead of next month’s crucial figures, which determine the annual rise in business rates.

“In the short-term, implementing Ofgem’s recommendations for action in the business energy market would see energy bills fall and help rapidly cut inflation,” Nicholls concluded.