Sector 'still suffering' despite ease to headline inflation rate

24-May-2023 - Last updated on 26-May-2023 at 10:58 GMT

Endless pressure: sector 'not out of the woods yet' as headline rate of inflation drops (Credit: Gety/Dimensions)

Hospitality firms are “not out of the woods yet” despite an ease to the headline rate of inflation, according to trade bodies from across the sector.

Figures from the Office For National Statistics (ONS) released Wednesday 24 May revealed the headline rate of inflation fell to 8.7% in April, down from 10.1% in March.

However, the data also showed the cost of food and non-alcoholic beverages continued to rise in April and contributed to high annual inflation, despite easing from 19.2% in March to 19.1% in April.

ONS estimated the current annual rate for the food and non-alcoholic beverages category was the second highest for more than 45 years. Wine and beer prices also saw increases between March and April this year.

While overall energy costs, notably gas prices, were estimated to be in decline, according to the data from ONS, the hospitality sector has continued to struggle with contracts that were previously locked at “sky-high” rates.

British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “It is a relief to finally see a fall in inflation, but we are not out of the woods yet, the impact of continued price increases over the past year are sure to be felt in the long-term.

Squeezed profit margins

“These conditions have wiped out profits for pubs and brewers and completely stagnated opportunities for growth across our industry.

“Soaring energy costs have further squeezed profit margins and we are still calling on the Government to instruct energy suppliers to offer fairer terms to business locked-in to sky-high rates to help with this.

“Hopefully, inflation will continue to fall in the coming months, bringing an overall decrease in cost but we still need action now to save businesses in the future.”

Night-Time Industries Association (NTIA) CEO Michael Kill added the hospitality sector is “still suffering” with a myriad of issues despite the easing of inflationary pressures and called for the Government to listen to pleas from the industry to cut taxes, in particular VAT.

He continued: “This will allow businesses to gain some financial headroom, the ability to plan and invest in the future, and play a bigger part in the country’s economic recovery.”

This comes as the latest UKHospitality (UKH) and CGA Quarterly Tracker showed the revenue generated by the sector in the last 12 months was 4.1% above generated pre-pandemic, falling below the like-for-like sales required to keep up with inflation.

Endless pressure

In addition, the tracker also showed the sector’s turnover contracted by 0.3% in Q1 this year, compared to Q1 in 2022.

UKH chief executive Kate Nicholls said: “Unfortunately, these figures no longer come as a surprise and simply reinforce the chronic nature of the pressure hospitality is under due to inflation.

“Despite consumer demand remaining strong and revenue being up vs 2019, businesses are simply nowhere near able to keep up with the cost pressures they’re facing across energy, food and drink.”

Nicholls continued that Government was “essential” to “stem the bleeding” for the industry as fears “endless pressure” would cause the sector to contract were starting to be realised.

She added: “This continued inflationary pressure shows there is a long way to go in this crisis yet. Food and drink are part of the core hospitality offering and it is becoming impossible for many to continue to absorb these costs.

“Sharp drops in energy, food and drink costs are urgently needed for businesses to remain viable and continue to serve communities across the country, create jobs and drive economic growth.”