Some hospitality businesses are expecting to have to raise prices for customers two or three times before April 2022, UKHospitality chief executive Kate Nicholls has said.
Speaking to parliament's Environment, Food and Rural Affairs Committee yesterday (9 November), Nicholls warned the sector was facing an "intense squeeze" on margins around Christmas.
She said cost price inflation in hospitality was at 13% and was a "worsening situation".
Supply chain issues and an inability for many businesses to raise prices around the festive season would lead to further price inflation in the New Year, Nicholls warned.
"A lot of Christmas activities are pre-booked and many of those will be sold and rolled over from last year, therefore the price is not always as flexible as it could be," she said.
"So you're going to see a really intense squeeze on margins in the run up to Christmas, the inevitable impact of that will be felt by consumers because it will have an inflationary effect."
She said this would see "significant" cost increases being passed on to customers, adding: "Some of our businesses are anticipating three prices increases for consumers before April."
The return of the 20% VAT rate at the end of March could see hospitality become even more expensive, warned Nicholls.
"The biggest thing the government could do to help the hospitality sector government short term is to maintain the 12.5% VAT, then we can invest in our product, our people and grow our way out of this," she said.
Nicholls said supply chain issues meant around 20% of products in all deliveries were not being delivered and there was no guarantee the situation would resolve by Christmas.
The Road Haulage Association (RHA) has warned there is a shortage of 100,000 HGV drivers which may not be resolved for the next year.
Hospitality has a 10% vacancy rate, meaning it is short around 200,000 workers since the sector fully reopened, and around a quarter of UKHospitality members have had to cut opening hours, close venues and refuse bookings because of staffing and supply issues, Nicholls said.
She added: "Revenues are suppressed by about 15%-20% in our sector simply because of labour shortages in our businesses and the supply chain.
"We will deliver as good a Christmas as we are able to but not as good as we would want to."
Photo: Shutterstock / Alena Veasey