A UKHospitality survey of over 340 hospitality businesses representing 8,200 venues has found that nearly half of operators (47%) are reporting that they will be forced to increase prices by over 11% this year, with 15% anticipating hikes of over 20%.
The rises come off the back of a Christmas trading period devastated by Omicron and following two years of severely disrupted trading. The increase in prices is being driven by soaring operating costs, with businesses reporting average rises of 41% in energy bills, 19% in labour costs, 17% in food prices, 14% drinks prices and 21% insurance costs.
With a return to 20% VAT, plus a rise in business rates and higher labour costs proposed for this April, the sector’s plight looks set to have a significant impact on the UK’s economy and drive up the Consumer Pirce Index further. With low consumer confidence now coming in to play, over 80% of operators surveyed said they have experienced either moderate (39%) or severe (42%) levels of cancellations since the start of the year, indicating that consumers are already feeling the pinch.
UKHospitality Chief Executive, Kate Nicholls, said: “Omicron has infected the start of 2022 with lower-than-expected trading levels and higher than expected cancellations in hospitality venues. One in three businesses in our sector have no cash reserves left and are already carrying heavy debt burdens. Many of our community pubs, restaurants, hotels and hospitality venues will therefore fail as the cost-of-living crisis bites, causing demand to faulter. This can only cause the UK’s wider economic recovery to stutter.
“This April’s planned increases in VAT, employment costs and business rates are therefore likely to prove one financial burden too many for businesses who only then, as we come out of the quieter winter trading period, can hope to begin to start trading at full capacity once more.
“The industry wants to play its full part in the UK’s recovery from the pandemic but, as these latest figures highlight, we can only do that with further support from the Government – support that must include keeping VAT at 12.5% permanently.”