Expert Insight
NEWS from
Kate Nicholls UKHospitality Chief Executive
While the announcement that energy prices are to be frozen will undoubtedly help hospitality
sector customers and staff, the industry best placed to drive the UK’s economic recovery remains in a parlous state.
We’re encouraged, though, by new Prime Minister Liz Truss’ recognition of the specific challenges hospitality faces, and reassured by the promise of further support.
UKHospitality is looking forward to working with the Government to develop plans for the long-term recovery for our sector, but make no mistake, if businesses big and small are to make it to next spring they’ll need help throughout this autumn and winter.
Because eye-wateringly high energy costs will still constrain spending in the sector, and operators themselves will still have to fund energy bills and other rising costs. So, unless the sector receives additional support, hundreds of hospitality businesses will close, with thousands of jobs lost.
And with some operators facing energy bill increases of up to 700%, the level of any additional support will need to be significant if it’s to be meaningful, particularly when you consider a recent survey of UKHospitality members, in which the importance of the energy price cap and wider support is laid bare by the stark results.
Indeed, one in five businesses say they won’t survive the current crisis, while three in five admitted they’re no longer profitable. The results go on to reveal that on top of energy price rises, the cost-of-living crisis will cost an anticipated £25bn in lost trade, likely to result in a 15% drop in employment – the equivalent of 383,000 jobs across the UK.
The survey also showed average energy price increases for the hospitality sector of 238%, with more than 70% of businesses seeing bills more than double, and nearly 30% hit with rises of over 300%. Increases on that scale mean average energy costs as a percentage of turnover have jumped from 5% in 2019 to 18% today. This makes energy bills now the second (up from fifth) largest cost to businesses – that’s a greater proportion of turnover than rent and rates combined.
As a result, hospitality businesses are having to take drastic action.
Three-quarters are being forced to raise their prices, more than six in 10 are reducing staff hours, four in 10 are reducing headcount, and half are cutting trading hours.
Which is why we’re urging the new Government to put in place a five-point plan of action through to April 2023, with a review in early 2023, to include: a 10% headline VAT rate for hospitality; a business rates holiday for all hospitality premises, with no caps applied; deferral of all environmental levies; reinstatement of a generous HMRC Time to Pay scheme; and the reintroduction of a trade credit insurance scheme for energy.
Our industry employs more than 2.5m people, and, as I’ve already mentioned, is critical to the nation’s economic recovery. With the right support, we can generate jobs, drive local investment and support communities across the UK. But that support must be significant and it must come urgently.
6
September 2022
www.venue-insight.com
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