The latest Business Confidence Survey from CGA by NIQ revealed the confidence of those working at senior management levels within the sector hit its lowest point since late 2022 in January and February this year.
Just a third (33%) of industry leaders felt confident about the prospects for their business over the next 12-months - eight percentage points down from October’s figure of 41%.
The figure also marked the lowest point since late 2022 and the second lowest since the Covid lockdowns of 2020, despite solid trading for many groups over the important Christmas period, stability in venue numbers and an easing of inflation in some areas.
In addition, the poll showed optimism was even more fragile among independent operators at just 12%.
Eroded profitability
Only 14% of the 8,100 hospitality sites surveyed felt optimistic about the future of hospitality in general over the year - six percentage points down quarter-on-quarter and barely a third of the level of 41% in January 2024.
Profitability, meanwhile, has been eroded by fast-rising labour costs, according to the survey.
More than four-fifths of leaders said fourth quarter trading was either ahead (43%) or level (40%) year-on-year. Some 31% saw increased profits and 29% said they had dropped.
Almost half (47%) of those surveyed said wage costs had significantly increased in the past 12 months, with another 52% saying they had increased.
Upticks in the cost of food and drink (79%), energy (57%) and rent (39%) were also reported. The strain on costs is set to worsen from April, when employers face extra labour costs.
Some 84% of leaders said the planned reduction in National Insurance contribution thresholds would have a very negative impact on their business.
Relentless squeeze
More than half of leaders said it could force them to cancel investment (64%), reduce staff levels (59%) and reduce employee benefits (57%).
In addition, smaller numbers feared they would be forced to defer pay increases, cut training, reduce trading hours or close sites.
CGA by NIQ director hospitality and food EMEA Karl Chessell said: “After a strong end to 2024 and a cooling of inflation, hospitality groups should be looking forward with positivity.
“However, our latest survey makes clear that leaders’ confidence is being hard hit by a relentless squeeze on margins.
“Entrepreneurs and smaller businesses, the lifeblood of hospitality, are particularly vulnerable, and new payroll costs will force many businesses to pull investment and cut jobs, compromising the economic growth the Government wants.
“Hospitality remains a dynamic industry, but the need for targeted support and a rethink on NIC is now urgent.”
