Falling petrol and food prices lead to a drop in inflation

Consumer Prices Index inflation was 7.9% in June, down from 8.7% in May, according to the latest figures from the Office for National Statistics.

A decrease in fuel prices was the biggest driver behind the fall, while food price inflation reduced to 17.3% from 18.7% in May.

“We are now entering one of the ‘golden periods’ of the year for hospitality, and a slight drop in the pace of increasing restaurant and hotel prices is a welcome development for both the sector and consumers. This follows yesterday’s news that in recent weeks, supermarkets have charted the most significant fall in checkout costs since grocery inflation peaked in March,” says Ed Bignold, managing director with Alvarez & Marsal’s corporate transformation services.

“As international travel becomes increasingly expensive, more Brits are expected to opt for staycations this summer. This may help sustain footfall in the UK’s restaurants, pubs and bars, and keep hotels at higher occupancy for longer.

“Nevertheless, the industry continues to be squeezed by input cost inflation and elevated wages, which show no signs of abating. Further pressure on consumers, particularly those facing rising mortgage costs, could dampen demand in the sector.

“With margins still under significant pressure, the coming months will be absolutely critical in ensuring the continued viability of many businesses in the sector.”

The Government has set a target of halving inflation to 5.3% by the end of the year.

Responding to the fall in inflation, UKHospitality chief executive Kate Nicholls says: “The rate of inflation reducing more than expected is good news for hospitality businesses, but it remains the case that food and energy costs are incredibly high.

“This reinforces that for inflation to fall further and faster, there needs to be more action to bring down those twin pressures of food and energy costs.

“Hopefully today’s better than expected figures also give pause for thought on additional interest rate rises, which are already having a significant impact on the sector.”