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Hospitality sales struggle amidst inflation despite 6.7% increase

Published:  08 September, 2023

According to the latest UKHospitality Quarterly Sales Tracker, turnover was up 6.7% in the last year to £137billion but, compared to 2019, remains almost 20% behind in real terms, when accounting for inflation.

The tracker, in association with CGA, also shows that sales in the last year are 2.3% up on pre-pandemic sales. However, the quarterly growth rate is slightly down (0.2%) year-on-year.

UKHospitality CEO 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. The persistently high costs of energy, food and drink means the task of keeping up with inflation is getting harder with every passing day.

“It has been clear for a long time that 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. The standout threat to the sector in the near future is the double whammy removal of business rates relief and an inflation-linked rise to rates.

“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.”

According to the CGA Prestige Foodservice Price Index, inflation fell marginally to 21.7% year-on-year in July.

Despite the slight fall of 0.9 percentage points, inflation remains only just below the Index’s previous peak of 22.9% in December 2022. The latest Index also reports a month-on-month increase of 0.7% – in contrast to supermarkets, where prices fell by 0.4% between June and July.

Shaun Allen, CEO of Prestige Purchasing, said: “Food and drink supply into hospitality has been slower to react to falling input costs than the retail sector. We are confident that over the remainder of the year, inflation will begin to ease at our kitchen doors, but both buyers and suppliers will need to play their part in curbing the continually rising costs that threaten the existence of so many of our sector’s brilliant operators.”

Meanwhile, ahead of the upcoming Programme for government, UKHospitality Scotland Executive Director Leon Thompson has outlined the need for a commitment from the first minister that rates will not rise with inflation, to avoid heaping further cost pressures on already strapped venues.

The news follows reports from the Scottish Fiscal Commission, which is projecting a 5.4% uplift in business rates in April 2024 – from 49.8% to 52.5%.

“After an extremely challenging year for Scottish hospitality with the chaos of the Deposit Return Scheme and ever-worsening cost of doing business crisis, the first minister has an invaluable opportunity to set out a positive vision for the sector,” said UKHospitality Scotland executive director Leon Thompson.

The Scottish government has also been criticised for not aligning its rates with England and Wales, which saw businesses benefit from a relief on rates by up to 75% following the pandemic.