Inflation leaving sector on 'cliff edge'

By Rebecca Weller

- Last updated on GMT

Enormous cliff edge: food inflation made biggest upward contribution to rising inflation in September (Credit: Getty/	fcafotodigital)
Enormous cliff edge: food inflation made biggest upward contribution to rising inflation in September (Credit: Getty/ fcafotodigital)

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Soaring food inflation has left many hospitality businesses facing a “cliffs-edge” as food costs push inflation up 10.1% in the 12 months to September 2022.

Figures released by the Office For National Statistics (ONS) today (Wednesday 19 October), revealed food inflation had seen its largest increase since 2006, making the largest upward contribution to the Consumer Price Index (CPI) between August and September 2022.

Additionally, the food and non-alcoholic beverage category, which saw a 14.6% increase, hit a 42-year high, with bread and cereals, meat products, milk, cheese, and eggs having made the largest upwards effects.

British Retail Consortium Helen Dickinson said: “Food prices are being hit hard by the war in Ukraine, pushing up the cost of fertilizer and animal feed, resulting in high global food prices.

“Business rates bills are set to jump by 10.1% next April, which equates to an extra £800m, on top of that, businesses will be paying far more than they owe due to the anomalies of a ludicrous scheme called transitional relief.

Double whammy 

“[The] Government must avoid this double whammy of extra costs, otherwise it is customers who will end up paying in higher prices.”

On a monthly basis, CPI rose by 0.5% in September 2022, compared to a rise of 0.3% in September 2021, with gas and electricity costs also cited as a key contributor by ONS to rising inflation.

Additionally, restaurants and hotels made an overall upward contribution to the rise in CPI of 0.08 percentage points, with the movement coming entirely from accommodation services.

This comes as last month saw fruit and veg soar by 35% according to research from the Department for Environment, Food and Rural Affairs (DEFRA​).

UKH chief executive Kate Nicholls said: “With the September inflation figures traditionally used to set tax changes and rates for the following year, there is a real risk hospitality businesses [could] face an enormous cliff-edge in April if these numbers are used to hike the business rates tax level.

“Such an increase at the same time as the risk of business rates reliefs ending could prove fatal for many.

Missed opportunity 

"With hospitality inflation contributing heavily to the overall inflation rate, we now risk an inflationary spiral where our higher costs lead to higher taxes which lead to even higher prices.

“As well as needing to reform the entire business rates system in the long-term, it’s now absolutely critical business rates relief is extended for vulnerable sectors such as hospitality and that downward revaluations are realised in full."

Furthermore, British Beer & Pub Association (BBPA) chief executive Emma McClarkin the Government missed an opportunity to stop inflation rising when Chancellor Jeremy Hunt announced the Government had reversed its decision to freeze alcohol duty earlier this week. 

She said: “These latest inflation figures demonstrate the folly of the Government’s ​decision not to freeze alcohol duty​.

"They had an opportunity to stop inflation rising uncontrollably for businesses and customers in our sector but instead have put further pressure on an already struggling industry.

"The freeze to alcohol duty would have put £360million back into our pubs and brewing businesses but with the U-turn they are left wondering, once again whether they will make it through what is set to be a very bleak winter.”

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