Firms 'not making any profit' despite increase in revenue

Figures from UKHospitality’s Quarterly Sales Tracker, released on Thursday 7 September, showed turnover was up 6.7% in the last year to £137bn but, compared to 2019, remains almost 20% behind in real terms, when accounting for inflation.

The UKH tracker, collated in association with CGA by NIQ, also revealed sales in the last year were 2.3% up on pre-pandemic sales. However, the quarterly growth rate was slightly down (0.2%) year-on-year.

UKH chief executive Kate Nicholls said: “These figures illustrate precisely the challenge facing hospitality businesses across the board.

“Demand is good and sales are strong but the rate of inflation means it’s near impossible for venues to keep up with the cost of doing business.”

Owner of the Dog at Wingham, in Canterbury, Marc Bridgen explained while revenue was up, costs were also up “across the board” and footfall was not where operators would like it to be due to the cost-of-living-crisis.

He said: “Revenues might be up, but it's irrelevant if you're not making any margin or profit.

Very frustrating 

“We’re taking more money but there's no margin in it because of all the inflationary challenges. It's very frustrating.

“Everything has gone through the roof. It is coming from all angles.

“Because of the huge inflationary pressures we've been under, all of this increased work, the rise in revenue is not leading to increased margins and profitability.”

Bridgen detailed the pub, which is number 29 on the Estrella Damm Top 50 Gastropub’s list​, recently saw the price of one of its “key premium lagers” increase by 7.5% in a month on top of food​, energy and duty costs.

“Tomatoes went up 100% overnight, they came back down but not to the same level. Poultry has also gone up by around 70% since 2019.

“The really massive one is energy, our utilities have gone from around £36,000 per annum to more than £100,000”, he continued.

Staffing issues have also put the sector under pressure, Bridgen added, be it shortages or increasing wage costs.

“Labour costs can often be the only place hospitality businesses can really try and make some savings or not burn margins.

Stand out threat 

“I agree with the increase in minimum wage, but it just means absolutely everything has gone up. When minimum wage increased our wage bill went up approximately 10%.”

The operator stated the impact of the challenges faced by the sector were evident in the number of recent pub closures​, which was estimated to be at the highest quarterly figure in almost a decade, according to data obtained by Price Bailey.

Bridgen said he was “very worried” about the industry over October, November and into the New Year as the cost-of-living crisis continues to bite.

“[They are going to] be very challenging and we have to hope December won't be affected too badly and people can save a bit of time, energy and money to celebrate over the festive period”, he continued.

Nicholls added the “standout threat” to the sector in the near future was the “double whammy removal” of business rates relief and an inflation-linked rise to rates.

She said: “That needs to be avoided at all costs, with a commitment to maintaining relief and avoiding an inflation-linked rise, to give the sector a fighting chance of keeping up with inflation.

“It has been clear for a long time these rising costs need to be tackled at source to properly bring down inflation, but we also need to ensure new costs aren’t tacked on in the future.”