Interest rate hike piles ‘even more pressure' on hospitality

The Bank of England has raised interest rates to 5% amid growing concerns this will put "even more pressure" on hospitality.

At a meeting that ended today (21 June), the Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase the interest rate by 0.5%, which had been set at 4.5% in May.

The MPC said it was a necessary move due to "data that indicates more persistence in the inflation process, against the background of a tight labour market and continued resilience in demand".

Following the 13th consecutive rise in interest rates, Paul Askew, chef patron of the Art School in Liverpool, said: "One of the most direct impacts [of the rise] is going to be mortgage rates rising accordingly. Even if some of the impact will not be felt until next year when mortgages deals end and need to be renewed, the narrative of the population's disposable incomes tightening is not going away.

"There's only so much punishment consumers can take. This is going to pile even more pressure onto hospitality businesses already on the brink."

He stressed: "None of us in hospitality should just be surviving – we should be flourishing – yet the prevailing challenges are not going away anytime soon. We need a major moment to recalibrate the entire hospitality industry and we need it now."

Michael Kill, chief executive of the Night Time Industries Association (NTIA), added: "Our industry can support the Government in bringing down inflation, if we are given the platform to trade. The Government needs to tackle some of the short term barriers to investment and growth, getting a handle on energy, food and drink costs, tackling sector workforce shortages and removing limitations to trade through deregulation."

UKHospitality predicted hospitality has the potential to grow its economic value by £29b by 2027, but that that it could also contract by £4b in the "worst-case scenario".

Responding to the interest rate rise, Kate Nicholls, chief executive of UKHospitality, said: "Hospitality has significant levels of business borrowing, including £10 billion alone from the pandemic, and it is a worrying situation if businesses have no choice but to prioritise loan repayments over business investment.

"Combined with other cost pressures across energy, food and drink, this is quickly becoming a ticking time-bomb that needs urgent attention."

She has urged the Chancellor to "work closely with the banks on providing much-needed support to hospitality businesses".