Majority of hospitality operators facing higher energy costs as sector battles against 'onslaught of challenges'

The 11th report of its kind, compiled in partnership between leading industry body UKHospitality and sector data and insight specialists CGA, it demonstrates how expectations of a swift sector recovery for the sector have been stymied by labour shortages, rising costs, and a drop in consumer confidence.

On a positive note, like for like sales in the sector are back to 2019 levels, buoyed by takeaway and delivery sales which are up 107% in May 2022 compared to May 2019. And there’s been a 1% net increase in the number of licensed premises in the UK between December 2021 and March 2022.

However, the report describes these as 'rare bright spots'.

One in seven hospitality jobs are now unfilled, which is impeding business to the tune of 16% of revenues, according to the report.

Nearly half (45%) of businesses have reduced trading hours and a third have had to close for a least a day. This is despite 77% of operators increasing pay to retain and attract staff, resulting in an 11% increase in average pay levels for hospitality staff over the last year.

This rise in labour costs is just one of the cost price pressures affecting businesses in the sector, with 93% of hospitality operators reporting higher energy costs.

At the same time year-on-year inflation was running at 10% in the first quarter of the year, with little prospect of a drop in the near future, and four in five (83%) business leaders in the sector reported being concerned about ongoing foodservices price rises.

Such concerns are not just affecting businesses, of course, and with people worried about paying for their own rising energy and food and drink prices, consumer confidence is dropping. With energy costs set to soar again in the Autumn, four in five of them think they will have to reduce their visits to hospitality venues as the crisis bites.

“The sector has proved its value to consumers post-pandemic, with sales back to 2019 levels but the labour shortage, inflationary cost pressures and dropping consumer confidence make it extremely difficult for any business to achieve real-terms year-on-year growth at the moment and there is little prospect of a respite on the horizon,” says Kate Nicholls, chief executive of UKHospitality.

“Operators will continue to work hard and creatively to meet these challenges and with positive action from Government, such as root and branch reform of business rates, a system that disproportionally taxes hospitality, the sector will be able to drive investment in local economies, create jobs and play a full part in the UK’s economic recovery.”