Hospitality sector entering 'catastrophic period'

By Rebecca Weller contact

- Last updated on GMT

Death by a thousand cuts: as costs continue to rise pubs have been left with no breathing space following Covid and face a tough year (Credit: Getty/sturti)
Death by a thousand cuts: as costs continue to rise pubs have been left with no breathing space following Covid and face a tough year (Credit: Getty/sturti)

Related tags: Finance, Vat, Legislation, Inflation, Energy costs, Multi-site pub operators

Pubs have had no breathing time following the pandemic as rising costs pose multiple challenges for operators who have survived by “the skin of their teeth” with the potential for a "catastrophic" and "very tough" year ahead, according to licensees across the sector.

Energy prices have seen massive increases in recent months with some operators seeing energy bills rise by 250​% or even being refused contracts by suppliers, at the same VAT has increased from 12.5% to 20% today (Friday 1 April) on top of inflation​, cost-of-living crisis, supply issues, recruitment crisis and food prices​ continuing to rise​.

Licensee of the Onslow Arms, in Loxwood, West Sussex, Rob Barr said: “Rising costs are obviously a huge concern for us all, the real challenge is they are all coming at the same time and off the back of the pandemic allowing for no real breathing space for us all.

“As the pressures of cost of living start to filter through every aspect of our spending, as operators we need to adapt our thinking and look at what would motivate guests to come into our sites. 

“It’s also an opportunity for us to review spending across the board, the “do we need this?” question is being asked and also looking at our productivity and how we work with our team to the most out of our sites when it is busy.”

Very tough year

However, some operators have hoped questioning spending will result in being more operationally efficient despite barely breaking even. 

Bath Pub Company managing director Joe Cussens said: “It may well be we don’t do much more than break even this year, which, when you consider we’re forecasting sales of £6.5M for 4 pubs is pretty depressing.

“Like everyone else, we’re putting up prices; but of course, there is a limit to how far you can increase prices before people stay away as they’re too high.

“We’re hoping we’ll come through this by being better organised, more operationally efficient than ever. It’s certainly going to be a very tough year.”

With the cost-of-living crisis continuing to worsen and inflation at a 30 year high, how much additional cost can be absorbed by consumers before they are driven away is a concern throughout the industry. 

This comes as Rishi Sunak’s​ Spring Statement on Wednesday 23 April saw the Chancellor ignore VAT, resulting in today’s increase, leaving operators disappointed and feeling unheard.

Catastrophic period 

Frisco Group managing director Heath Ball said: “I can only describe what we’re going through as death by a thousand cuts.

“Many operators survived the pandemic by the skin of their teeth and most with high levels of debt, now they’re being asked to repay that debt via a business with diminishing margins.

“It’s a case of absorbing some of the costs, passing some on where you can and buying well and looking to work with suppliers to get the best prices without compromising on quality.

“The Spring statement [proved] two things; the Government doesn’t care and, as an industry, we don’t have a voice around the top table.

“The sad reality is as much as our industry leaders are doing their best in representing our case with great passion, it’s only our trade that listening, not those in the seats of power that can make a difference.

“Sadly, if nothing is done, we’re entering a catastrophic period for our industry."

Related topics: Other operators

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