Sector firms want to invest despite cost pressures

10-May-2024 - Last updated on 10-May-2024 at 15:51 GMT

Willing to pay: investments would include on sites and on labour development (credit: Getty/SolStock)

Pubs and hospitality businesses want to invest in the future of their sites despite a host of cost pressures continuing to smash the sector.

A joint survey by UKHospitality, British Beer & Pub Association, Hospitality Ulster and the British Institute of Innkeeping revealed a desire from businesses to invest, both in development and training of their teams, and in venue refurbishments and improvements.

However, it also showed the challenges around rising wage bills, food and drink costs and disproportionately high taxation in relation to other sectors.

Despite these pressures, 95% of operators are planning to invest in customer service, 92% in staff training and 71% in venue refurbishments – all up significantly on last quarter.

Venue closures slow

Research from CGA by NIQ revealed venue closures have slowed in recent months and despite the cost-of-living crisis, consumers are prioritising visiting hospitality venues as an “affordable treat” that they “most look forward to”.

At a time when people are thinking carefully about spending their money, hospitality remains key to unlocking the growth that is lacking in the UK economy at present.

As the UK’s third largest employer, the hospitality sector has the power and agility to act quickly and be part of this much needed growth, but it desperately need confidence that any increased trading will be converted into profit, before they will invest further.

When comparing the first quarter of 2024 to the same period in 2023, the survey discovered that despite more than 33% of operators seeing an increase in revenues, 70% of venues have seen a reduction in profit, with nearly 50% of venues operating at a loss or just breaking even.

One in four businesses remain completely exposed, having no cash reserves, with nearly one in two having six months or less while 66% of businesses now have significantly increased wage costs.

Resilience of sector

In a joint statement, the trade bodies said: “Our regular survey of our joint memberships showed the resilience of our sector, as well as an appetite to invest in teams and venues for the future.

“Consumers choosing to spend their disposable income in pubs, restaurants, hotels, and cafes is no surprise, as we provide a much-needed opportunity for fun, celebration and vital social connection, but in order for our members to survive and thrive, they need to be profitable.

“Their profitability has been heavily impacted by high inflation in food and drink, high energy costs, disruption from rail strikes and the impact of increased labour costs, that have had a ripple effect at every level.

“The sector is innovative, adaptable and has the potential to provide much-needed growth for the economy, creating vital local employment and bolstering local supply chains, all while supporting essential social connection in high streets, towns and cities.

“In order for operators to invest in this potential, however, the sector also needs a fairer, modern and more proportionate tax and regulatory regime, enabling it to remain at the heart of local economies and communities across the UK.”