Prices expected to rise by 11% across sector

By Amelie Maurice-Jones contact

- Last updated on GMT

Combatting costs: Price rise hike needed for sector recovery (Getty/ Peter Cade)
Combatting costs: Price rise hike needed for sector recovery (Getty/ Peter Cade)

Related tags: ukhospitality, Finance, Price rises, Trade

Prices across the hospitality sector are expected to rise by 11% throughout the year, as businesses try to combat cost pressures and rising VAT rates, a UKHospitality (UKH) survey has revealed.

The survey of more than 340 hospitality businesses representing 8,200 venues employing 190,000 people, revealed nearly half of operators (47%) reported they would be forced to increase consumer prices by over 10% this year, with 15% expecting hikes exceeding 20%. 

This follows a devastating winter trading period where Omicron depleted cash reserves, and almost two years of disrupted trading. The price increases are 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 
  • 21% insurance costs 

Not-so-merry Christmas

Hospitality’s proportionately larger weighting in the Consumer Prices Index (CPI) means the average 11% price increase would mean a 1.7ppt rise in CPI. In comparison, it would take a rise of more than 50% in energy prices to have a comparable effect. 

UKH 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 falter. This can only cause the UK’s wider economic recovery to stutter".

Support required

The planned increases in VAT, employment costs and business rates come April were 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,” said Nicholls. 

Related topics: Rebuilding the Pub Sector

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