Interest rate hike will 'negatively hit hospitality'
This comes after the Bank of England voted to hike interest rates from 0.5% to 2.25% - the seventh rise since last December.
UKH chief executive Kate Nicholls said the rise in interest rates had a two-pronged negative impact on the hospitality sector, which was already struggling.
She said: “It will simultaneously diminish discretionary spend for consumers while making borrowing more expensive, exacerbating the already challenging trading environment for our businesses.
“This underlines the acute need for further support for the industry, in the form of business rates reliefs and reduced rates of VAT to spur recovery in a vital sector upon which millions of jobs depend.”
Slowing prices
The rise is an attempt to slow the rate of rising prices. The last time interest rates were this high was during the 2008 financial crisis.
Further increases are predicted for later in the year and into 2023. Last year, the Office for Budgetary Responsibility (OBR) looked at what might happen if the UK were to experience longer lasting inflation, reported the BBC.
If this happens, UK interest rates could hit 3.5%, the OBR said. Furthermore, a number of analysts have forecasted interested rates could hit 4% or more.
The sector is already facing economic challenges including a cost-of-living crisis, staffing shortage and energy crisis.
While the Government has introduced an Energy Relief Scheme, industry leaders are concerned it is “no where near enough”.
Under the scheme, announced yesterday (Wednesday 21 September) by Business Security Jacob Rees-Mogg, wholesale gas prices are expected to be fixed for all non-domestic energy customers at £211 per mWh for electricity and £75 per mWh for gas for six months.
However, the Scottish Licensed Trade Association (SLTA) stated while it welcomed the announcement, it warned it may not be enough.
Scheme
SLTA managing director Colin Wilkinson said: “This is news we have been waiting for and obviously we welcome it but when you look beyond the headlines it doesn’t live up to the hype.
“This new scheme caps the wholesale price and pubs and bars could still be paying 200-300% higher bills than normal; there are pubs and bars currently on a rate of 90p per kWh, in comparison to 15p in normal times.
“The Government says the current wholesale price of gas is about 42p per unit therefore businesses should see a reduction of 21p in their unit price but this still means much higher bills than before the energy crisis.
“Nothing in the plan tackles the problems of large deposits and bonds, particularly for the SME independent sector, nor restricts the additional margins made by the energy suppliers.
“The SLTA is concerned this may not be the lifeline we were all hoping for and today’s announcement is not enough.”
