As business confidence slows, according to the most recent edition of the Business Confidence Survey, and with the Chancellor’s Budget scheduled for March 6th, business executives and trade associations are continuing to urge the Government to provide backing on a number of demands including a reduction in VAT for hospitality.
The survey, by CGA by NIQ, show that the leaders of Britain’s leading hospitality companies, who represent 23,000 hospitality sites, are feeling less confident due to intense cost pressures bringing an abrupt end four quarters of confidence growth, and highlights the hospitality industry’s vulnerability in the wake of COVID-19 and the inflation crisis.
Nearly all leaders say they are concerned about the National Living Wage increases (99%), business rates (95%), inflation in food and drink costs (98%), interest rates (84%) and VAT (84%).
Only 41% of leaders are now optimistic about the hospitality market for the next 12 months, which is an eight percentage point decrease from 49% in October while 9% of leaders believe their business is at risk of failure in 2024, four percentage points more than in October. One in 10 (10%) says their company currently has no cash reserves to draw on.
There are similar worries about the near future of hospitality in other CGA research conducted by NIQ. In 2023. The Hospitality Market Monitor with AlixPartners reported net closures of approximately 3,000 licensed establishments, or more than eight failures a day, while the CGA RSM Hospitality Business Tracker showed leading hospitality groups achieved year-on-year sales growth of just 0.1% in January.
Kate Nicholls, Chief Executive of UKHospitality, said that the results clearly show that hospitality is united behind the pressure for the Government to lower VAT for the sector, saying that this “knock to business confidence, no doubt underpinned by the relentless cost pressures operators are facing, is a yet another demonstration of why the Government must take action in next month’s Budget.
Nicholls continues “We’re continuing to make representations on behalf of the sector at the highest levels of Government and I hope the Chancellor acts on 6 March.”
Karl Chessell, director, CGA by NIQ said, “Hospitality is a resilient and resourceful sector, but the years of COVID restrictions and high inflation have taken a major toll. This survey shows how confidence, profit margins and reserves have all been eroded, and many operators, especially smaller ones, are now extremely vulnerable. Costs of doing business have soared in every area, and the case for targeted government intervention is now clear and urgent. Without relief on tax, rates and the impact of inflation on key inputs, more businesses will be sent to the wall. Hospitality can kickstart the UK’s recovery from recession, but only with the right support.”
The survey results come following Westminster debate earlier this week when a cross party group of MPs, chaired by Stirling MP Alyn Smith, wrote to the Chancellor ‘strongly supporting’ an immediate VAT cut with Alyn Smith calling for a cut in the VAT rate for UK hospitality businesses from 20% to 5% to help them survive.
The Business Confidence Survey from CGA by NIQ drew responses from leaders at CEO, MD, chair, board and other senior management levels. The research was conducted in January and February 2024.