The 10th issue of Future Shock – Hospitality in 2022, compiled in partnership between leading industry body UKHospitality and sector data and insight specialists CGA, highlights the vulnerable state of the UK’s pubs, bars, restaurants and nightclubs. It also demonstrates, however, how the industry can play its part in solving the cost of living crisis.
Following the pandemic, the industry has lost nearly a tenth of its licensed premises, with the worst hit sectors being casual dining chains and nightclubs losing 17% of venues, and restaurants, losing 10% 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.
Two years on, and those businesses that have survived are now facing a tsunami of soaring costs. In addition to rocketing energy prices, for example, operators are facing 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 they can, operators are expecting to have to pass on an 11% increase in prices to consumers.
This increase will come at a time when UK consumers are facing their own soaring bills. The report shows that 70% of people are now concerned about their long-term finances and more than half (55%) are more worried about their personal 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.
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.”
Karl Chessell, director – hospitality operators and Food, EMEA at CGA, said: “Just over two years on from the start of the pandemic, we can finally look to the future with positivity. The latest report reinforces the feeling of cautious optimism. Trading for managed groups is edging back towards pre-COVID levels. Consumers and business leaders are recovering their confidence and site openings are heading in the right direction. 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 government. Hospitality is ideally placed to power the UK’s economic recovery.”
Download the latest issue of Future Shock here.