The ALMR recently issued its annual report, in which it warned that the combination of the Apprenticeship Levy, the trigger of Brexit and changes to business rates and the national minimum wage could undermine the growth of an evolving and innovative sector.
Speaking at the ALMR Christie & Co Benchmarking Report launch, Nicholls talked about the effect of the national wage increase and said: “In our sector, this will have a significant impact as it is going to hit about 80 to 90% of hospitality workers by 2020 which will have a huge significant burden.”
Productivity
She advised operators on how to do deal with the wage increase effectively: “Think about productivity improvements, which may mean letting people go. Look at rostering and reducing hours for staff."
Nicholls is also urging the Government to delay the Apprenticeship Levy for two years as a result of the two-year lag on growth and investment following the 2007 recession, and said she is concerned that the triggering of Article 50, due to take place in April next year, could mean the same thing happens again.
The report also revealed that operating costs are on the rise, with specific mention to payroll costs, threatening to undermine growth. Nicholls said: “Food sales now account for 32% of turnover, with wet sales making up 61%, the lowest in the history of the Report.
Encouraging results
“These are encouraging results for the sector, but evidence of rising costs coupled with uncertainty following the EU referendum, threaten to undermine the good work businesses are carrying out and could potentially derail investment in venues and staff.
“Operating costs now stand, on average, at 49.3% of turnover - up from 47.7% in last year’s survey. Payroll costs now stand at 27.8% of turnover, a substantial amount, with payroll costs set to rise over the short and medium term. Our recent employment survey showed tight profit margins of around 8% to 12%. A 1.5% increase in costs could reduce them by 11%.”