Pressures on sector not reflected in inflation ease

By Rebecca Weller

- Last updated on GMT

Squeezed margins: Pubs not seeing food prices fall despite inflation ease (Credit: Getty/wildpixel)
Squeezed margins: Pubs not seeing food prices fall despite inflation ease (Credit: Getty/wildpixel)

Related tags Inflation Finance Legislation

Pubs have not seen any reduction in food costs while reports of a slowdown to the rate of inflation damages customer perceptions of the pressures faced by the sector.

Figures released by the Office for National Statistics (ONS) earlier this week showed the headline rate of inflation fell from 3.4% to 3.2%​ between February and March, with food prices, notably meat, having made the largest downward contributions to the number.

However, owner of the Dog at Wingham pub in Canterbury, Marc Bridgen, told The Morning Advertiser (MA) operators ​were yet to benefit from any price falls.

In addition, Bridgen said reports of falling food costs did not help customer perceptions of the pressures faced by hospitality firms as off-trade prices are “entirely different”, making it harder to explain why businesses have been left with no choice but to up menu prices.

The licensee explained meat costs at the Dog had increased from some £4,000 a month this time last year to around £6,000 while its spend on vegetables has almost doubled.

He continued: “When I saw the [news] it made me laugh because I've not been made aware of any significant drops in meat prices, we’re not seeing anything coming down anywhere.

“I don't want to sound like a broken record or banging on about the same old things but nothing's changing.

Squeezed margins 

“The margins are little to non-existent and prices across the board have been increasing consistently since the war in Ukraine started and it feels like it’s hitting the hospitality industry more than ever.”

In addition, the operator explained footfall was “really poor and sporadic”, in particular regarding the accommodation side of the business.

He said: “There's no dressing it up, if we're lucky we're doing 20 to 40 covers a day when the minimum target is 50, which we used to consistently hit.

“Everything we buy we've seen inflation in consistently over the past two years and it's now twinned with footfall being down and squeezed margins.”

Bridgen added this also meant pubs were faced with the added pressure of giving consumers a reason to visit, such as putting on events.

“People need a good reason to go out. They're not just going out for a few drinks at the end of the day or at the weekend or out for a meal; what's bringing them out is a very good reason to do so”, he continued.

To help combat this, Brigden implored the Government to implement a VAT reduction for the sector, adding it would be a “game changer” for firms.

“Hospitality businesses are struggling to break even and many are making losses.

“If the Government made changes to VAT we would probably get to a break even position, which is still not great, but it would be better than operating at a loss”, the operator urged.

Economic bellwether 

In addition, UKHospitality (UKH) chief executive Kate Nicholls said while the news was “positive” it needed to be reflected in the easing of interest rates, which would “reduce costs and incentivise investment in growth”.

She continued: “This is particularly important for parts of the economy where prices are more stubborn, like hospitality.

“Inflation in our sector is more than 50% higher than the national figure and this is before we see the effect of the £3.4bn increase in rates and wages which hit the sector this month.

“With a clear trend of inflation easing across the economy, it’s time for central banks to support businesses and drive investment.”

Echoing Nicholls, British Beer & Pub Association (BBPA) chief executive Emma McClarkin said until there was a corresponding fall in interest rates, the cost of doing business would remain a “pressing concern” for the industry.

She added: “The beer and pub sector is a true economic bellwether and impactful ways to reduce the different component costs of doing business for our nation’s iconic breweries and pubs must be commitments in the manifestos of the main parties ahead of the general election, including at a likely Budget this September.”

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