Recession and soaring inflation 'final straw' for sector

05-Aug-2022 - Last updated on 05-Aug-2022 at 09:02 GMT

Final straw: soaring inflation and looming recession last thing businesses need (Credit: Getty/10'000 Hours)

Looming recession and soaring inflation could be “final straw” for small businesses and the Government must “act decisively and swiftly”, according to trade bodies across the sector.

This comes as the Bank of England today (Friday 5 August) warned the country could be in recession for a year from this Autumn, following a prediction inflation would surpass 13%, on top of yesterday’s (Thursday 4 August) confirmation interest rates would increase from 1.25% to 1.75%.

Scottish Licensed Trade Association (SLTA) managing director Colin Wilkinson said: “The last thing businesses need just now is for the Bank of England to increase the interest rate to its highest level since December 2008.

Feeling the squeeze

“Businesses have been feeling the squeeze since the pandemic hit two-and-a-half years ago and are already grappling with paying off debts incurred during Covid, this could be the final straw.

“The outlook really is gloomy for hospitality businesses who don’t want to pass on rising business costs to their customers facing the same soaring cost increases to their energy, fuel, and food bills.

“However, for some there is no choice and finding the right balance is proving exceptionally difficult for many.”

Wilkinson added the “perfect storm” of challenges faced by the sector had not yet reached its peak and urged the Government and ingoing Prime Minister to adopt a “business first” approach, providing urgent measures such as a reduction in the rate of VAT and lower business rates to help businesses.

Double whammy

Additionally, the Bank of England further warned mortgage repayments would also increase on top of predictions energy prices could see further hikes due to the soaring cost of wholesale gas on international markets.

UKHospitality (UKH) chief executive Kate Nicholls said: “Today’s double whammy of forecasts is further evidence the Government must act decisively and swiftly to bolster the plummeting confidence of hospitality businesses.

“Our sector is a massive potential driver of growth and employment but is ladened with debt, has a mammoth staffing crisis and, due to inflation and energy prices, is seeing consumer confidence and discretionary spend evaporate.

“The Government and Prime Ministerial candidates must clearly set out how they will tackle the cost of doing business – the cost of living won’t come down without it – and explain how their plans will help consumers and the economy through this winter and beyond.”