Sector 'not out of the woods' as inflation eases

By Rebecca Weller

- Last updated on GMT

Step in the right direction: ease to inflation positive but sector not out of the woods yet (Credit: Getty/DNY59)
Step in the right direction: ease to inflation positive but sector not out of the woods yet (Credit: Getty/DNY59)

Related tags Inflation Finance Legislation

The downturn in inflation is “positive news” for the sector but firms are not “out of the woods yet”, according to industry leaders.

Figures from the Office for National Statistics (ONS), released today (Wednesday 19 July), estimated the headline rate of inflation dropped to 7.9% in the year to June 2023, down from 8.7% in May.

British Beer & Pub Association (BBPA​) chief executive Emma McClarkin said: “This will be welcome news to pub and brewing businesses, but we're not out of the woods as there is still a long way to go for the pressures on our customers and supply chains to feel the difference.”

On a monthly basis, inflation rose by 0.1% in June, compared with a rise of 0.8% in June 2022.

At risk

The downturn was largely driven by falling prices for motor fuel but there were also “notable downward effects” from food and non-alcoholic beverages, ONS stated.

According to the data from ONS, food inflation eased to 17.4% during this period, down from 18.4% the previous month. However, food costs​ increased 0.4% between May and June this year.

UKHospitality (UKH) chief executive Kate Nicholls said: “The rate of inflation reducing more than expected is good news for hospitality businesses, but it remains the case that food and energy costs are incredibly high.

“This reinforces that for inflation to fall further and faster, there needs to be more action to bring down those twin pressures of food and energy costs

“Hopefully today’s better than expected figures also give pause for thought on additional interest rate rises, which are already having a significant impact on the sector."

Food prices remain a concern for many firms, with the latest CGA by NIQ and Fourth Business Confidence Survey​ revealing 50% of senior-level operators were worried about the sector’s post-pandemic recovery due to food costs.

The figures from CGA showed 79% of operators were also concerned about energy​ prices and contracts, while well over half felt the same way about business rates (59%) and VAT (54%).

Just 54% of respondents felt optimistic about prospects for their business over the next 12 months, while 28% said they had less than three months’ worth of cash reserves, with one in seven (14%) stating their business was at risk of failure in the next year.

Fiscal intervention 

McClarkin added: "Our pubs and brewers need confidence to invest and grow their businesses, whilst their customers need reassurance that inflation will continue to slow, and prices fall to give people more spending power.

“This news is positive, but we need inflation to continue falling not just be a one off in order for our industry to perform to its full potential and support communities and economies across the country."

Night-time Industries (NTIA​) CEO Michael Kill added while inflation had taken a “step in the right direction”, many operators were also concerned about next month’s changes to alcohol duty​, which could “eradicate any benefit to the sector in the short term”.

He continued: “While we see a positive reflection in the inflation figures, we are some way off suppressing the cost inflation crisis suffered across the night-time economy and hospitality sectors.

“It is important the Government continues to engage with the sector over the coming months and accepts that there will need to be a fiscal intervention for businesses at the sharpest end of this crisis.”

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