The Bank of England (BoE) put interest rates up from 4.5% to 5% yesterday (Thursday 22 June), which is the highest level for 15 years despite expectations of a smaller rise by analysts.
UKH argued hospitality has the potential to grow its economic value by £29bn by 2027 but in the worst-case scenario, it could contract by £4bn.
The trade body said flexibility from the Government and banks on repayment terms, including Covid loans, are a critical part of avoiding the potential monetary losses. It added this should include extension to loan terms, options to move to interest-only payments or delay payments, and flexible ‘Time to Pay’ arrangements from HMRC for tax payments.
UKH CEO Kate Nicholls said: “Hospitality has a proven record of delivering growth and creating jobs, and we want to achieve that £29bn economic boost by 2027. However, steep increases in interest rates will quickly stifle growth and squash that potential.”
Prioritise loan repayments
She added hospitality has significant levels of business borrowing, including £10bn alone from the pandemic, and it is a worrying situation if businesses have no choice but to prioritise loan repayments over business investment.
“Combined with other cost pressures across energy, food and drink, this is quickly becoming a ticking time-bomb that needs urgent attention,” Nicholls argued.
“A direction from the chancellor to banks to adopt a flexible approach to business borrowing and repayments would be a lifeline for many and should be a top priority for the chancellor tomorrow during his talks with major lenders.
“We want to continue our track record of delivering growth and creating jobs, and the last thing we want to see is more businesses lost to circumstances out of their control, so I would urge the Chancellor to work closely with the banks on providing much-needed support to hospitality businesses.”
Meanwhile, the Campaign for Real Ale (CAMRA) national chairman Nik Antona said: “The increased interest rates from the Bank of England are yet another heavy weight to add to the licensed trade’s already blistered shoulders.”
Investment negatively impacted
Antona claimed the interest rates rise will negatively affect any investment in pubs, social clubs, breweries and cider producers because it will be more expensive to borrow, which makes it even harder for people to save their locals as community-owned spaces.
He warned: “This just reiterates the perfect storm that the licensed trade is currently drowning in. The ongoing cost-of-business crisis has meant that pubs, and the breweries that supply them, have had no option but to increase their prices to simply survive, but with the current cost-of-living crisis out of control, consumers have less disposable income to support their local pubs, clubs and taprooms across the UK.”
The Night Time Industries Association (NTIA) said the BoE prediction that the UK would see a sharp fall in interest rates three months ago is a “distant reality”.
NTIA CEO Michael Kill said: “With interest rates raised for the 13th time in succession to 5%, up by 0.5%, with many predicting further rises in August and early next year. We have to question the current long-term financial strategy by the Government.
“Our industry can support the Government in bringing down inflation – if we are given the platform to trade.
“The Government needs to tackle some of the short-term barriers to investment and growth, getting a handle on energy, food and drink costs, tackling sector workforce shortages and removing limitations to trade through deregulation.”
