Hospitality sector needs stability to help combat rising prices

By Nikkie Sutton

- Last updated on GMT

Hope: food prices are rising, but the rate of increase is slowing
Hope: food prices are rising, but the rate of increase is slowing

Related tags: Inflation

Stability is urgently needed for the hospitality sector to help operators deal with the impact of the general election on food and drink inflation, buying company Lynx Purchasing has warned.

Lynx managing director Rachel Dobson highlighted how the economy could experience a period of stability if the markets look ahead rather than reacting to speculation.

She said: “Whoever is in Government after 8 June, they will be getting down to almost two years of detailed Brexit negotiations.

“While it is inevitable that there will be political debate about the outcome on both sides of the channel, we can only hope the markets continue to take a more pragmatic view."

Long-term picture

Rising prices (year-on-year):

Meat – up 5%

Higher global demand is a challenge with more Irish beef, New Zealand lamb and EU pork going to areas such as China and the Middle East, while UK producers are also exporting more thanks to the fall in the value of sterling.

The continued popularity of gourmet burger and steakhouse-style menus is also driving strong demand in foodservice for the trimmings used to make burgers and other dishes, pushing up prices.

Dairy – up 9%

The availability of cream, used for making butter and cheese, has been low for some time, putting some pressure on price.

There could be challenges with cheese supplies later in the year if production stays low for any long period thanks to the fact there are better returns from butter than cheese.

Fruit and veg – up 6%

Market prices of potatoes have been high following a poor UK crop last season, the quality and volumes of potatoes in storage has run very low and imported crops have been needed to make up the shortfall.

However, after the problems surrounding Spanish crops, the British leafy salad season has arrived, followed by peppers, tomatoes and cucumbers alongside summer soft fruits such as strawberries and raspberries.

Figures from the summer 2017 edition of the Lynx Purchasing Market Forecast ​report.

Dobson added: “The impact of the fall in the value of sterling after the Brexit vote has now been more or less priced in by suppliers, so there is potentially a period of greater stability ahead if the markets focus on the long-term picture rather than constantly react to speculation.”

The purchasing company released a summer edition of its Purchasing Market Forecast ​report which showed a slight decline in the rate at which prices are rising.

The report also showed that in its ‘Lynxometer’ - a basket of food and drink bought regularly by Lynx Purchasing customers - food and drink inflation was running at 9% in March this year, but dropped to 6% over the 12 months up to June 2017.

Dobson outlined the benefit of the rate of inflation rising at a slower rate and how any trade deals made following the triggering of Article 50 as the UK leaves the European Union (EU) will take time, giving operators the opportunity to plan.

Respite for operators

“Prices are still rising but not as fast, which is some respite for operators,” she said.

“The long-term impact of Brexit on the hospitality sector will be decided by the nature of the deal in a range of areas including farming and fisheries policy, import tariffs, and the availability of migrant labour.

“Whatever is decided, it will be several years before anything changes and operators will have plenty of notice to plan. What’s needed is market stability in the interim.”

The Association of Licensed Multiple Retailers Kate Nicholls hailed stability and certainty was "absolutely essential" for businesses if they are to have any chance of planning, budgeting and investing.

She said: “A snap general election, and the ongoing uncertainty around Brexit, means that a lot of businesses are looking forward with some trepidation. Delays to implement promised reliefs to businesses and food price inflation have hit some venues hard and the post-election government needs to provide swift assurances and support for employers.

“This includes measures to address rising costs right across the business and steps to make sure that employers have access to employees from outside the UK, to keep their businesses innovating and growing.”

A spokesperson for the British Beer & Pub Association echoed the calls for stability for the sector.

She said: “While Brexit will bring opportunities as well as challenges, I would agree that, given rising inflation and current business uncertainty, the sector needs a stable policy framework with no new and unnecessary costs and red tape.

“When it comes to Licensing, the 2003 Act has been subject to constant change since it was introduced, and what we really need is a period of stability.

“We are already dealing with a great many new costs and regulatory challenges this year, through a big increase in beer duty in the Budget, unfair business rates and new costs coming in through the form of the apprenticeship levy and national enrolment of pensions, as well as increase in the minimum wage."

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