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Red alert for hospitality as the cost of living heats up

Published:  08 August, 2022

Hospitality businesses are facing a case of ‘out the frying pan, into the fire’ this autumn as the UK teeters on the verge of a recession and a crippling cost of living crisis, leading members of the trade have said.

As of summer 2022, businesses are still getting to grips with their recovery from Covid. The first summer without restrictions since 2019, this year, businesses have benefited from a summer heatwave, which has helped to return some – if not all – of the missing footfall. The ladies’ sparkling win at Wembley last weekend is also expected to help to continue the celebratory atmosphere into the second half of the year, when the men’s teams head to Qatar.

These things are unlikely to make up for a number of other factors, however – including continuing inflation spikes and a cost of living crisis which has yet to truly bite.

“Just when we thought – finally, finally – we could start trading again normally from January 2022, we’ve been socked with all manner of new hardships: input inflation, scarcity of labour, continuing challenges getting goods into the UK,” Stephen Finch, MD of Vagabond Wines, said.

“Then, there is the reality that many city-centre parts of the country haven’t yet fully returned to pre-pandemic levels. There are choppy waters ahead.”

Other members of the trade agree. Support from government via the rent moratorium and lower VAT rates have both come to an end in the past six months. Last week also saw The Bank of England implement its biggest interest rate rise since 1995. On Thursday (4 August), it raised interest rates by 0.5 percentage points to 1.75% in its sixth consecutive rise in order to calm inflation. It is also warning that the UK would enter a recession this winter, which could last until 2024. 

It’s clear that cost of living crisis is due to bite down at a critical time for hospitality – when the warmer weather rescinds and consumers have to make hard choices.

    • READ MORE: Record 64% of the UK’s top 100 restaurant companies are now making a loss

“The big issue is the cost of living crisis and suppressed demand,” Miles Beale, chief executive of the Wine & Spirits Association (WSTA) told Harpers. “People were drinking at home during the pandemic because they couldn’t go out. But that was before energy prices and the war in Ukraine drove up inflation. If it’s going to be a choice between being cold and putting the heating on or having a drink, we’re in for a difficult autumn.”

Coupled with the uncertainty of a tense leadership contest, with candidates flip-flopping on economic policy, it seems the sector may be at battle stations once again.

Beale’s advice? “Be as prepared as possible. If like me, you think that demand may not hold, things will be affected over the next few months. Other costs are coming online too, such as increasing transport and logistics costs. It’s a difficult environment to be going into,” he said. 

For the full story, see this month’s issue of Harpers, available in print and online now.