Research from trade body UKHospitality (UKH) showed as well as energy prices, the cost-of-living crisis will put an extra £25bn in loss of trade, which it predicted was likely to result in a 15% fall in employment. This is equal to more than 380,000 jobs across the UK.
The survey revealed average energy prices have rocketed by 238% for the hospitality sector, with more than 70% of firms seeing bills more than double and almost a third (30%) are being hit with hikes of more than 300%.
These rises have resulted in average energy costs have jumped from 5% in 2019 to almost a fifth (18%) as a percentage of turnover, making energy bills the second largest cost to business – a larger proportion than rent and rates combined.
As a result, three quarters of hospitality companies are being forced to increase prices, more than six in 10 are cutting staff hours, about 40% are shrinking head count and half are reducing trading hours.
Following the survey results, almost 300 hospitality firms including Mitchells & Butlers, have signed an open letter to the new Chancellor Kwasi Kwarteng, calling for a “plan that cuts business costs, stimulates demand and tackles inflation”.
The letter has a five-pronged plan of action to April 2023, alongside a review in early next year.
This included a 10% headline VAT rate for the sector, a business rates holiday with no caps, deferral of all environmental levies, to reinstate a generous HMRC Time to Pay scheme and the reintroduce a trade credit insurance scheme for energy.
Quick action needed
UKH chief executive Kate Nicholls labelled the hospitality sector “critical” to nation’s economic and social recovery.
She said: “With support [the sector] will be well placed to drive growth, generate jobs and invest in local communities.
“To achieve this however, the new Government needs to act quickly to address the soaring energy costs that are strangling the sector.
“We are encouraged by talk of energy prices freezes for families and businesses but this won’t be enough to save hundreds of businesses and thousands of jobs in the sector.
“The package of five measures we are asking for will help us guarantee jobs and wages, to ensure businesses stay afloat and to preserve and grow our communities across the UK.”