UK inflation at 10.1% poses 'greatest challenge' for hospitality operators

Hospitality businesses have expressed concerns over UK inflation hitting double digits (10.1%) for the first time since 1982.

Figures from the Office of National Statistics (ONS) published today have revealed that the Consumer Price Index soared by 10.1% in the 12 months to July 2022, up from 9.4% in June.

Rising food prices made the largest upward contribution to the increase in inflation rates between June and July 2022.

Ed Baines, chef and co-owner of Randall and Aubin in London’s Soho, told The Caterer that “spiralling” inflation and food costs are his “greatest challenge”. His restaurant specialises in seafood, which has seen prices going “through the roof”.

He added: “We’ve spent an awful lot of time trying to source alternatives, because you can’t just say ‘the price of butter has tripled over the last two years, so we’re just going to charge more for everything’. You’ll just lose your client base.”

The ONS reported that this month’s rise in food and non-alcoholic beverage prices marked the highest monthly increase since May 2001 with staples such as bread, cereals, milk, cheese and eggs driving the largest upward contributions.

Restaurant and hotel prices have also risen by 9% in the year to July 2022, up from 8.6% in June, which was the highest annual rate to be recorded in the National Statistics series.

Neil Manhas, general manager, UK and chief financial officer, Europe, at Pizza Hut UK & Europe, commented: “For hospitality, the pressure is even higher. With an endemic labour shortage crisis, supply chain disruption, and skyrocketing price rises across food, fuel, and utility supply chains – inflation is impairing the industry’s road to recovery.”

Lionel Benjamin, co-founder of AGO hotels, which owns 14 hotels across the UK, revealed that inflation in labour, utilities and insurance costs have had the biggest impact on his profit and loss statements.

He said: “We did raise prices slightly, but any increase that we achieved in price point has been completely eroded by the costs that we are facing in the business. I’ve never seen something as significant as this in my career and I’ve been working in hotels since 1983.”

Benjamin added: “Give the stimulus package today, allow visas, reduce business rates and reduce VAT. Those are the things that government should be doing today.”

A member survey from the Night Time Industries Association (NTIA) has also warned that double-digit inflation puts one in five businesses at risk, as 48% of night-time economy (NTE) businesses are ‘barely breaking even’, while a further 20.2% revealed that they are operating at a loss.

Over a fifth (20.8%) of NTE businesses stated that they are ‘not confident’ that they will survive the next 12 months, as they have ‘no scope whatsoever’ to raise prices in the local market.

Michael Kill, chief executive officer of the NTIA, said: “We are seeing businesses handing the keys back to landlords every week, as operating costs become completely unsustainable.

“Time is running out for the Government to intervene. At this moment we need a decisive leader who will stop escalating energy prices and give further relief to struggling businesses by reducing VAT and extending Business Rates relief.”

It comes after Kate Nicholls, chief executive officer of UKHospitality, called for “urgent support from the government” following yesterday’s ONS release, which showed that low unemployment rates were exacerbating the staffing crisis.

The ONS also reported that average ‘real terms’ pay levels plummeted to a record low (3%) between April and June.

The government has been contacted for comment.