Over 40% of UK hospitality businesses operating at a loss

The hospitality sector in the United Kingdom is facing a significant financial crisis as new data reveals that over two-fifths of businesses within the industry are currently operating at a loss.

Moreover, a staggering 70 per cent of these struggling establishments have announced plans to increase their prices in the coming year. This double blow to both businesses and consumers paints a challenging picture for the sector's recovery.

According to a recent survey conducted by Peckwater Brands, 44 per cent of businesses are operating at a loss, with 53 per cent impacted by the rising cost of goods and 50 per cent by higher energy bills. The market research involved surveying 250 senior decision-makers within UK hospitality businesses during May 2023.

Research also revealed that a third (34%) do not think their business will survive the next 12 months. The survey captured responses from a broad range of establishments across the country, highlighting the extensive impact of the industry's ongoing economic and operational challenges.

This anticipated price hike may lead to increased financial burdens for consumers and could potentially affect their spending habits within the sector.

The hospitality sector has been grappling with a series of setbacks since the onset of the COVID-19 pandemic. Stringent lockdown measures, restrictions on operating capacity, and a decline in consumer confidence have dealt severe blows to businesses. The shortage of staff, rising costs of supplies, and increasing energy prices have compounded the challenges faced by the industry, making it difficult for many establishments to break even.

Industry experts warn that these developments could have far-reaching implications, including potential job losses and closures of beloved establishments. The hospitality sector is a vital component of the UK economy, providing significant employment opportunities and contributing to the country's overall GDP. If businesses continue to struggle financially, the long-term consequences could be detrimental to the industry's recovery and growth.

Sam Martin, CEO of Peckwater Brands, said: "Conditions for hospitality businesses are undoubtedly tough, with record food inflation, skyrocketing energy bills and falling consumer spending all having a notable impact. Our research shows lays bare the stark reality; so many establishments are loss-making and many fear for their survival."

The CEO further stated: "Unfortunately, the challenges facing the hospitality sector will not disappear any time soon. Raising prices might be the only option available to many businesses, but with consumers wrestling with a cost-of-living crisis and seeking out lower prices wherever possible, this action could damage their customer bases."

"One can only hope that in the coming months, inflation falls sharply and overheads drop, ensuring hospitality firms are not forced to close their doors. If they were, local high streets would be greatly diminished, as would the UK economy," he added.

Trade organisations and business leaders have called upon the government to offer support and implement measures to alleviate the burden on hospitality businesses. Suggestions include providing financial assistance, reducing taxes and operating costs, and creating policies that incentivise consumer spending within the sector. These initiatives, combined with continued efforts to control the spread of the virus, could help stabilise the industry and facilitate its path to recovery.

The coming months will be crucial for the UK hospitality sector as businesses attempt to navigate their way through these challenging times. While the industry demonstrates resilience and determination, the road to recovery will require collaboration between companies, consumers, and policymakers. All stakeholders need to work together to find solutions that will support the revival of the sector and secure its future.

In January, the Energy Bill Relief Scheme by the government offered help to businesses, the public sector and charity organisations by giving an amount of over £35 million per day. In the wake of Putin's illegal war in Ukraine and its impact on global energy rates, the financial relief provided by this program holds the potential to be a lifeline for many businesses that need help in stabilising their cash flow.