Hospitality and foodservice revenues forecasted to drop £30bn in 2021

By Lisa Riley

Published: 13 January, 2021

Revenues across the hospitality and foodservice industry have been forecasted to take a £30bn hit this year, with Covid restrictions likely to play out well into 2021.

And this comes at a time when the industry is already on its knees as a result of the drastic restrictions implemented since the UK’s first lockdown in March, with those estimated to have led to a drop of £47bn in 2020, which translates to 52% of 2019 revenues, despite the boost of the VAT reduction on food to 5% from mid-July, according to the recently released Rebuilding of Hospitality 2021 to 2025 report.

Moreover, with the forecast built on VAT remaining at 5% for the rest of 2021, the report also highlights the consequences if the government does not keep it at that level, pointing to the significant property debts that are outstanding, on top of Business Rates set to be re-instated from April.

“If the government pushes VAT back towards 20% from April, the danger is that operators will be forced to implement price rises, which would in turn impact inflation, which is something that the government needs to avoid,” said leading forecaster, analyst and commentator on the UK hospitality and foodservice market, Simon Stenning, who produced the report.

“No operator could comfortably accept a 10% or 15% drop in revenues from their food sales from April onwards, without pushing prices up and have the risk of stifling consumer demand,” he added.

For subsequent years, from 2022 to 2025 the report forecasts that the industry will rebuild slowly, with 2022 regaining 93% of 2019 sales to reach £91bn.

Over the course of 2020 to 2025, it estimates that the total hospitality industry will have lost £132.9bn of expected revenues if the pandemic hadn’t happened.

On a more positive note, Stenning said hope remained that locked-up consumer savings from 2020, which have been estimated at around around £100bn, will feed through into boosting 2021 and beyond.

However, said Stenning, historically it has taken around seven years for built up savings to be spent.

“Increased savings sit more with higher-income households, so benefits will come for operators targeting those, leaving challenges for mid-market operators whose customers’ haven’t built up savings in their households, therefore value is going to be more important,” he said.

“As we go through into 2022 and beyond, life and the economy ought to regain their shape, and hospitality will continue to grow and thrive, but it will look different,” he added.

But, he reiterated, so much of this rests on further government support to get the industry through the next six months with the abrupt end of the eviction moratorium, the end of furlough and a potential VAT rise.

“Hospitality can play a large part in the economy regrowing, helping consumers to regain confidence and get back to enjoying life, but it needs help.”

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