Action needed as hospitality leaders’ confidence plummets

By Amelie Maurice-Jones contact

- Last updated on GMT

A cry for support: Leaders' confidence crashes due to cost-of-living crisis (Getty/ South_agency)
A cry for support: Leaders' confidence crashes due to cost-of-living crisis (Getty/ South_agency)

Related tags: Finance, Cga, Multi-site pub operators, Pubco + head office, ukhospitality

The confidence of pub, bar and restaurant leaders has tumbled over the second quarter of 2022 after costs soared for both businesses and consumers, according to CGA and Fourth’s second-quarter Business Confidence Survey.

Only 23% of leaders are now confident about the next 12 months for the general market – barely a third of the total of 65% at the last survey in March, the research revealed.

Furthermore, the proportion of leaders' feelings confident about their own businesses, while falling by 15% since the last survey, remains much higher at 53%. This may reflect a greater optimism among the multi-site leaders making up the survey cohort, in comparison to the less financially stable independents which make up much of the wider market.

The Business Confidence Survey shows much of these larger businesses remain profitable for now. Nearly nine in 10 (88%) leaders report their company is currently operating at a profit, and half (53%) say profitability is at or above pre-Covid levels.

UKHospitality chief executive Kate Nicholls said the dwindling confidence of business leaders was “concerning if unsurprising” considering the mountain of challenges the sector continues to confront.

She continued: “Swift Government action – and a commitment to measures to support hospitality from the Conservative party leadership contenders – is vital, to give operators the confidence to plan and invest with a degree of certainty."

Urgent support needed

Nicholls added: “The schemes to alleviate horticulture worker shortages could similarly help hospitality recruit for the 11% of unfilled vacancies across the sector.

“Support is also urgently required to tackle energy prices that continue to rise at unprecedented rates, and business rate reform is needed to enable the sector to invest in local economies, create jobs and play a full part in the UK’s economic recovery.

The survey showed that business leaders anticipate cost inflation will compromise consumers’ spending. On average they predict a 6% drop in sales and a 12% impact on profit margins over the next 12 months.

Without support, operators will feel they have little option but to pass costs over to customers in the form of price rises, which will ultimately further drive inflation and damage both consumer confidence and profitability, according to Nicholls.

The research also highlighted the labour shortages that continue to create issues for hospitality. Leaders say an average of 11% of their roles are currently vacant – up by 2% since the first quarter of 2022. Competition for staff has pushed up pay levels too, by an average of 10% in the last 12 months alone.

CGA director of hospitality operations and food, EMEA, Karl Chessell said the research shows the squeeze on hospitality businesses is tightening after a solid first half of 2022.

Serious concerns

He said the full impact of the cost-of-living crisis was yet to be seen, but leaders were aware it was likely to reduce guests’ visits over the rest of the year.

While many hospitality venues currently remained profitable, he added, businesses left fragile after Covid lockdowns would now be seriously concerned by the impact of rising costs over the coming year.

Fourth managing director, EMEA, Sebastien Sepierre said: “With the constant barrage of challenges hospitality businesses have to contend with, it is a testament to the skills and dedication of leaders and their teams that so many remain successful in the face of this.
“However, this Survey highlights just how incredibly delicate the situation is. Confidence is dropping among business leaders, whose operations are swamped with pressures from all angles, not least rising costs and labour shortages.
“Smart solutions and ingenuity are required to navigate these challenging times and ensure hospitality businesses continue to provide customers with the enjoyable social experiences they crave whilst remaining profitable.”

Related topics: Rebuilding the Pub Sector

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