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Consumers and on-trade at a stand-off over costs

Published:  22 August, 2022

As inflation takes hold of consumers and businesses alike, the hospitality industry remains in a deadlock, with businesses planning for more challenging times ahead.

According to Lumina Intelligence, 83% of eating-out leaders have had to raise prices due to increasing business costs. 

Inflation, labour shortages, availability and supply chain challenges were also concerns over the next 12 months.

And, to add insult to considerable injury, 33% of leaders reported a decrease in consumer footfall in 2022, as customers reduce their spending due to the cost-of-living crisis. 

With labour costs and other inputs squeezing margins, the on-trade is forced to pass on some rises to consumers.

It’s easy to see why consumers are turning away from hospitality. According to CGA, the on-trade has raised menu prices by an average of 9% in the last year, and they plan to increase them by a further 6% in the next 12 months.

Staffing crisis

It is proving just as hard to attract employees to the on-trade. 

Last week, Office for National Statistics (ONS) announced that unemployment levels are at a record low, while the total number of job vacancies in May-June 2022 was 1.3 million.

The hospitality sector accounts for 174,000 of those vacancies, and industry leaders have weighed in on how best to solve the crisis.

Kate Nicholls, CEO of UKHospitality, said: “Staff shortages have been at a record high in the hospitality industry for some time, causing thousands of operators to cut trading hours or close for whole days, at a cost of £21bn in lost revenue.

“At the same time, operating costs are soaring across the board for businesses already carrying heavy debt levels from the pandemic. The industry needs urgent support from the government to survive and generate jobs and growth. In short, the recovery of the sector and the UK economy is threatened by the workforce crisis.”

Despite salaries increasing, inflation means that in ‘real terms’, average pay was down by -3% between April and June.

According to the Lumina report, attracting and recruiting staff is a challenge for 80% of eating-out businesses. When asked why these challenges are being experienced, over a third of respondents noted the fallout of European workers from Brexit, 31% noted the nature of pay across the sectors, and 27% of respondents highlighted the impact of the coronavirus pandemic causing workers to re-evaluate job priorities and move to different industries.

However, there have been some businesses that have responded positively to the staffing crisis.

For example, Young’s launched a new internal platform to enable staff to choose their own hours and attract new employees, whilst Rick Stein Restaurants has launched a flexible careers scheme.