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Morning Briefing for pub, restaurant and food wervice operators

Wed 19th Jul 2023 - Rising prices pile pressure on sector with one in seven businesses at risk of failure in next 12 months:
Rising prices pile pressure on sector with one in seven businesses at risk of failure in next 12 months: Hospitality’s post-covid-19 recovery is threatened by rising prices in multiple key areas, leaders have warned in the latest Business Confidence Survey from CGA by NIQ and Fourth. More than a quarter (28%) of leaders in the quarterly survey said they currently have less than three months’ worth of cash reserves, and one in seven (14%) said their business is at risk of failure in the next 12 months. Half (50%) of senior-level operators are now very concerned about inflation in food and drink prices, with 33% concerned, 16% moderately concerned and just 1% unconcerned. Around four in five leaders have seen increases in the price of eggs (85%) and chicken (80%), and nearly as many have experienced hikes in the cost of beer (79%) and red wine (74%). Leaders have raised pay for both new and existing staff by an average of 11% in the last 12 months – ahead of the rate of inflation over that period. Rises have been driven by increases in the National Minimum Wage and National Living Wage from April, which have concerned around two thirds (65%) of business leaders. Rising labour costs are also being fuelled by widespread staff shortages. Across hospitality, 9% of roles are now vacant and open for application, and only half (49%) of leaders feel confident about recruitment over the next 12 months. Four in five (79%) leaders are very concerned or concerned about energy prices and contracts, while more than half feel the same way about business rates (59%) and VAT (54%). To mitigate costs, leaders told the survey they have raised food menu prices by an average of 13% in the last 12 months. The soaring costs are holding down hospitality leaders’ confidence. While just over half (54%) of them now feel optimistic about prospects for their business over the next 12 months, this figure is well below pre-covid levels. Karl Chessell, CGA by NIQ’s director – hospitality operators and food, EMEA, said: “This is a resilient and resourceful sector and businesses have steadily built back from the turmoil of covid-19, but relentless inflation means many of them are now operating on extremely tight margins. Rising prices and enforced increases in pay levels have left few companies unscathed, and some are now very fragile.”

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