Inflation expected to spike core menu items’ prices

Prices for key fresh produce are forecast to increase for hospitality buyers following the UK inflation jump to 3.5% in April, compared to March’s 2.6%.

While the Office of National Statistics figures pointed to restaurant and hotels inflation easing to 2.7% in April year-on-year, inflation for food and non-alcoholic beverages rose slightly from 3% in March to 3.4% in April.

With staple products such as meat, potatoes and dairy already recording price increases significantly ahead of the headline rate of inflation, hospitality operators face further pressure on profits this summer, warned purchasing specialist Lynx Purchasing.

It identified beef, poultry, potatoes and dairy products as being subject to further price hikes over the summer.

Managing director Rachel Dobson said: “Hospitality businesses are already dealing with increased costs in areas such as staffing and business rates. Their ability to absorb further cost increases is limited, but at the same time, consumer confidence is very fragile.

“Although the headline rate of inflation is relatively low, it’s forecast to increase across the summer, and at the same time there are a number of products where prices are rising at higher rates.”

She advised operators to manage food waste to control costs, as well as apply a “disciplined approach to purchasing”.

Meanwhile, Saxon Moseley, partner and head of leisure and hospitality at audit, tax and consulting firm RSM UK, said: “Operators have clearly been drip-feeding price increases since the start of the year to offset the rise in employers’ National Insurance contributions and National Minimum Wage. In fact, prices have increased by 1.3% already since December.”

However, he said the jump in food inflation is of bigger concern to operators: “When factoring in alcohol, the rise in food inflation jumps to 4% year-on-year, which is yet another cost increase that will put a dent in operators’ margins. Unfortunately, there’s only so much they can keep increasing prices, particularly as consumer confidence is already fragile. Operators must tread a fine line between passing on these costs and not putting consumers off.”

UKHospitality predicted that ‘unsustainable’ pressure on businesses would inevitably see prices continue to rise.

Chief executive Kate Nicholls said: “This significant increase in inflation is unsurprising given the £3.4b in annual cost increases that hit hospitality in April.

“It’s clear that, on top of continuing hikes in utility prices, the raft of additional costs from the budget, which came into force in April, is putting unsustainable cost pressure on already strapped businesses. Regrettably, that forces up prices and so fuels inflation.”

She called on the government to “tackle the ongoing cost of doing business crisis”, adding: “The government must look to bring down costs for businesses and it’s critical that the Bank of England meets market expectations to lower interest rates in the coming months.”