One-third of hospitality businesses now operating at a loss

One-third of hospitality businesses are now operating at a loss and are at risk of failure, according to a new study.

Six out of 10 businesses have had to cut jobs, while 63% have had to reduce the hours available to staff to mitigate cost increases and keep trading.

The joint study, by UKHospitality, the British Institute of Innkeeping, the British Beer & Pub Association and Hospitality Ulster, laid bare the impact of the increases in employer National Insurance Contributions (NICS) and changes to business rates on restaurants, hotels and pubs.

Over half of operators surveyed in May said they have been forced to cancel investment, while 76% of hospitality operators said they have had to increase prices.

The survey follows a series of independent restaurant closures in the last month. The Angel of Dartmouth restaurant in Devon has announced plans to close after more than 40 years due to “increasingly difficult trading conditions” while Peter Sanchez-Iglesias has also closed his Paco Tapas restaurant in Bristol.

Chef Tom Kerridge will close his Butcher’s Tap & Grill pub in London after two years of trading amid a “challenging climate”, though the venue will reopen in a new pub format later this summer.

Operators have called for the government to reverse the NIC increases, reduce VAT for hospitality and speed up the planned introduction of lower business rate multipliers.

In a joint statement, the trade bodies said: “The government seems to be setting itself up to miss its own targets with these most recent cost hikes for the hospitality sector.

“Hospitality is vital to the UK economy but is under threat from ongoing costs rises, which the April increases have only exacerbated. Jobs are being lost, livelihoods under threat, communities are set to lose precious assets, and consumers are experiencing price rises when wallets are already feeling the pinch.

“The government must act urgently to mitigate for the changes to employer NICs and also deliver on its promise of root and branch business rates reform. The overall tax burden on our sector must be reduced, including consideration of the longstanding ask of a VAT cut for the sector, so the hospitality industry can return to investment, job creation and growth in communities the length and breadth of the country.”

Photo: Dani Ber/Shutterstock