Profitability ‘plummets’ as operating costs soar

By Rebecca Weller

- Last updated on GMT

Critical situation: 74% of operators surveyed stated energy costs biggest contributor to ‘plummeting’ profitability (Credit: Getty/ Dimensions)
Critical situation: 74% of operators surveyed stated energy costs biggest contributor to ‘plummeting’ profitability (Credit: Getty/ Dimensions)

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Hospitality trade bodies have called on the Government to tackle inflationary headwinds and introduce a new tax and investment regime to get the industry back on track and recognise the contribution it could make to the economy.

This comes as a new survey, conducted by the British Beer & Pub Association (BBPA), British Institute of Innkeeping (BII) and UKHospitality (UKH), revealed the rising cost of energy, goods ​and labour has caused the profitability of hospitality businesses nationwide to plummet, with only 37% currently turning a profit​.

A joint statement from the BBPA, BII and UKH said: “These figures are extremely worrying and demonstrate the critical situation hospitality businesses across the country are currently in.

Critical role 

“Given the chance, our industry has huge growth potential and the ability to play a critical role in the levelling up of communities in every single part of the UK, but instead we are still struggling to get back on our feet properly after a turbulent two years.”

The survey comes almost one year after the Government released its Hospitality Recovery Strategy, which looked to increase the resilience of the sector by improving profitability and putting pubs, bars, and restaurants at the heart of plans to revitalise local economies after the pandemic.

However, almost half (45%) of businesses have been forced to reduce opening hours to avoid closing permanently with one in six without cash reserves and less than one-third (28%) able to consider investing in their businesses due to the challenging economic climate, according to the trade bodies.

Perfect storm 

Furthermore, the survey showed 74% of participants citied soaring energy costs as the biggest contributing factor in depleting profitability, while more than half stating goods (55%) or labour (54%) were major contributing factors.

The statement added: “In the past few weeks inflation ​has hit record levels and costs on key ingredients and utilities has rocketed, whilst consumer confidence has plummeted resulting in fewer customers in our venues.

“We are weathering a perfect storm, but we can’t hold on forever, we need relief as soon as possible before the cost of doing business forces venues to close for good.”

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