Business leaders' confidence rise but cost pressures threatens recovery

05-Apr-2022 - Last updated on 08-Apr-2022 at 11:59 GMT

Rising costs: the large majority (93%) of respondents in the survey were worried about food and drink price inflation (credit: Getty/Caia Image)

Multi-site restaurant, pub, and bar leaders are six percentage points more assured about the future than last year, with 65% now confident about the next 12 months of the market, according to the latest CGA and Fourth’s Business Leaders’ Survey.

Since the previous survey in December 2021, the number of leaders feeling confident about their own business’ prospects has nudged up by two percentage points to 68%.

CGA Group CEO Phil Tate said: “After two years of Covid-related disruption, our survey shows multi-site businesses are finding their feet again.

“Hospitality remains a very attractive sector for consumers and investors alike, and as we move into the second quarter of 2022, we can be cautiously confident that sales and profits will continue to build.”

However, hospitality’s recovery from the pandemic has been threatened by mounting costs for both businesses and consumers, with more than four in five (93%) leaders having said they were concerned about inflation in food and drink prices, while 79% were worried about the public cost-of-living crisis.

Survey results

Furthermore, almost two thirds (63%) were concerned about VAT and the end to relief for the hospitality sector, and there was widespread anxiety about rising costs in energy, labour, and other key inputs.

Operators also face ongoing problems in the supply chain, which began after Brexit and accelerated during the pandemic, with four in five (82%) having experienced products not turning up and 77% faced with reduced product lines and 64% with delayed deliveries.

Of the 14,000 sites represented in the latest survey, 90% said they had already been impacted by higher costs across the supply chain as the majority have had to pass on, or have planned to pass on, some of the costs to consumers with their menu prices rising by 8%.

Tate added: “However, businesses that were weakened during the pandemic now face more fierce headwinds, and inflation is making it tough to achieve real-terms growth.

“The end of VAT relief and lack of Government support in the recent Spring Statement risks stalling hospitality’s recovery just as it gathers pace.”

Rising costs concerns

Despite concerns regarding rising costs, the survey also indicated improved profitability within the sector, as 84% of respondents said their business was currently operating at a profit, an increase of four percentage points than the December survey, with only 5% making a loss.

Fourth managing director EMEA Sebastien Sepierre said: “While it’s encouraging to see business confidence climb, the impact of rising costs, supply chain issues and the ongoing recruitment challenge continues to be extremely threatening to the sector.

“These challenges are amplified by the return to 20% VAT rates and the National Living Wage rise, both of which came into force last week and are set to hit finances hard, at a time the industry can ill afford.

“It’s vital businesses continue to do everything they can to plan ahead, in order to protect their bottom line and also maximise efficiencies related to their workforce and inventory.”