At the same point last year, inflation in the Index stood at 10.2%, which when combined with the latest figure means prices have risen by around 34% since May 2021.
A slowdown in inflation in the first quarter of this year had led to hopes that pressures would ease during the rest of 2023, but improvements in many key upstream indicators have failed to materialise. Food and drink price rises come on top of rising costs in other areas of hospitality and a squeeze on consumers’ discretionary incomes, leaving many businesses operating on very tight margins.
On a month-on-month basis, inflation dropped slightly to 1.8% compared to April. Categories that are under particular strain include Vegetables, Meat and Poultry and Sugar, Jam, Syrups & Chocolate. Potato prices rose sharply in during May, influenced by rising production costs, labour shortages, a 2022-23 storage crop more than 5% below the prior year, and significant short-supply in many parts of continental Europe. Drought and irrigation are having an increasing impact across Europe on product quality, size and price.
Shaun Allen, CEO of Prestige Purchasing said “Food prices in the UK hospitality sector continue to increase at just under 2% each month. This rate of increase is likely to be close to a tipping point, where dominant inflationary pressures should start to be eased by competing deflationary factors. The exact timing of this tipping point is uncertain whilst impacts like Brexit, energy, labour costs, interest rates and climate change remain volatile.”
James Ashurst, client director at CGA by NIQ, said: “A 34% hike in prices in just two years has been very harmful to hospitality. Added to rising payrolls, ongoing labour shortages and a heavy tax burden, it has left hospitality businesses that were weakened by Brexit and COVID-19—especially independents—in fragile condition. Restaurants, pubs and bars have had no choice but to raise menu prices, which in turn risks a drop in visits. As we move into the second half of 2023, businesses and individuals alike will be hoping for long overdue respite.”
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