Confidence rises among hospitality businesses

In a poll of restaurant operators, nearly half (47%) said they feel confident about prospects for their business over the next 12 months, according to a Business Leaders’ Survey from CGA by NielsenIQ and Fourth. This is an increase of 18 percentage points from CGA’s last survey three months ago.

Despite this rise in business confidence, 20% of respondents admit to feeling pessimistic.

Three in 10 (30%) leaders feel confident about the eating and drinking out market in general, which is significantly higher than the 8% recorded in the previous survey, but still some way off the 65% that was recorded in January 2022.

More than four in five (84%) leaders say their business operated at a profit last year, and nearly half (51%) were more profitable than in 2021. However, many businesses remain extremely vulnerable after three years of disruption from COVID-19 and fast-rising costs, says CGA, with 14% of leaders saying their business is at risk of failure in 2023.

“After battling through three relentlessly challenging years, hospitality leaders are rightly upbeat about their long-term prospects,” says Karl Chessell, CGA’s director for hospitality operators and food, EMEA.

“Pubs, bars and restaurants have coped admirably with the pressures forced on them, and consumers remain as keen as ever to eat and drink out when they are able. However, business confidence still lags well behind pre-Covid levels, and with few signs of respite on costs it is very clear that 2023 will be another difficult year. Hospitality is a dynamic and resilient sector, but thousands of fragile businesses need support on tax and bills if they are to ride out these immense challenges.”

Inflationary pressures

The research from CGA and Fourth emphasises the inflationary pressures facing hospitality, with nearly all leaders saying they have experienced higher costs in food and drink (96%), energy (91%) and front-of-house labour (91%). This has led to average increases of 12% and 10% in food and drink menu prices respectively in the past 12 months.

“The hospitality industry remains in a precarious position, despite this survey highlighting a growth in business and trading confidence compared to late last year. Sector businesses are continuing to fight a battle on multiple fronts, contending with workforce related challenges and soaring costs that are hitting supply chains hard,” says Sebastien Sepierre, managing director for EMEA at Fourth.

Continued support required

The Business Leaders’ Survey also highlights a desire more for Government support for hospitality in 2023. Four in five (81%) leaders say they want to see a cut in hospitality’s rate of VAT, 61% would welcome help with business rates reform, 46% wanted more generous support on energy costs.

Responding to the survey, UKHospitality chief executive Kate Nicholls says that the results “demonstrates the resilience and positivity of our sector”, even in the face of the challenges.

“With the cost of doing business crisis showing no signs of slowing down, there is urgent action needed to tackle the root causes of inflation and clear support among leaders for UKHospitality’s asks of Government in the budget,” she says.
 
“If the Chancellor acts to extend more energy support, reform the broken business rates system and reduce the sector’s rate of VAT, the Government can harness the spirit of hospitality businesses to see off current challenges, drive economic growth and lift the nation’s economy.”