Hospitality leaders' confidence falls as cost-of-living crisis starts to bite

CGA and Fourth’s second-quarter Business Confidence Survey reveals that only 23% of leaders are now confident about the next 12 months for the general market — barely a third of the total of 65% at the last survey in March.
 
The proportion of leaders feeling confident about their own​ business, while falling by 15 percentage points since the last survey, remains much higher at 53%.

It is suggested this may reflect a greater optimism among the multi-site leaders making up the survey cohort, in comparison to the less financially stable independents which make up much of the wider market.

The Business Confidence Survey shows most of these larger businesses remain profitable for now. Nearly nine in 10 (88%) leaders report that their company is currently operating at a profit, and half (53%) say profitability is at or above pre-Covid levels.
 
However, business leaders anticipate that cost inflation will compromise consumers’ spending. On average they predict a 6% drop in sales and a 12% impact on profit margins over the next 12 months.

The Survey also highlights the labour shortages that continue to beset hospitality. Leaders say an average of 11% of their roles are currently vacant — up by two percentages since the first quarter of 2022. Competition for staff has pushed up pay levels too, by an average of 10% in the last 12 months alone.

“After a solid first half of 2022, this survey shows the squeeze on hospitality businesses is tightening,” says Karl Chessell, CGA’s director - hospitality operators and food, EMEA.

“The full impact of the cost-of-living crisis remains to be seen, but leaders are aware that it is likely to reduce guests’ visits over the rest of the year. While many hospitality venues currently remain profitable and popular, businesses that have been left fragile after Covid-19 lockdowns will now be seriously concerned by the impact of rising costs over the coming year.”

Kate Nicholls, chief executive of trade body UKHospitality, says the dwindling confidence of hospitality business leaders is concerning if unsurprising.

“Swift government action - and a commitment to measures to support hospitality from the Conservative Party Leadership contenders - is vital, to give operators the confidence to plan and invest with a degree of certainty.”

With regards to recruitment, Nicholls believes similar schemes to those used to alleviate horticulture worker shortages could help hospitality with the 11% of unfilled vacancies across the sector.

“Support is also urgently required to tackle energy prices that continue to rise at unprecedented rates, and business rate reform is needed to enable the sector to invest in local economies, create jobs and play a full part in the UK’s economic recovery.

“Without support, operators will feel they have little option but to pass costs over to customers in the form of price rises, which will ultimately further drive inflation and damage both consumer confidence and profitability.”