Amid mounting costs, business leaders more confident in food sector: survey
4 in 5 leaders have profitable businesses.
Over two-thirds of restaurant, pub, and bar leaders are confident about trading prospects in the next 12 months according to the latest Business Confidence Survey from CGA and Fourth. The rating increased 6% compared to the previous survey in December 2021.
More than four in five leaders say that their businesses are profitable and 5% of leaders are making a loss. However, mounting costs for both businesses and consumers pose a threat to the ongoing recovery of the hospitality sector during the pandemic. 93% of the leaders are concerned about inflation in food and drink prices, 79% are worried about the public cost-of-living crisis, 63% are troubled with VAT. Meanwhile, nine in 10 leaders are impacted by higher costs.
“While it’s encouraging to see business confidence climb, the impact of rising costs, supply chain issues and the ongoing recruitment challenge continues to be extremely threatening to the sector. These challenges are amplified by the return to 20% VAT rates and the National Living Wage rise – both of which came into force last week and are set to hit finances hard, at a time the industry can ill afford. It’s vital that businesses continue to do everything they can to plan ahead, in order to protect their bottom line and also maximise efficiencies related to their workforce and inventory,” said Sebastien Sepierre, managing director EMEA, Fourth.
With these challenges on costs in energy, labour, and other key inputs, the large majority of the sector have passed and are planning to pass some of the costs to the consumer through increased food prices. Menu prices are rising by 8% on average.
Operators are also backed against the wall highly affected by Brexit and the pandemic. More than four in five operators have seen products not turning up and experienced reduced product lines. More than two out of three had delayed deliveries.
“After two years of COVID-19-related disruption, our survey shows that multi-site businesses are finding their feet again. Hospitality remains a very attractive sector for consumers and investors alike, and as we move into the second quarter of 2022, we can be cautiously confident that sales and profits will continue to build. However, businesses that were weakened during the pandemic now face more fierce headwinds, and inflation is making it tough to achieve real-terms growth. The end of VAT relief and lack of government support in the recent Spring Statement risks stalling hospitality’s recovery just as it gathers pace,” said Phil Tate, CGA Group CEO.
The survey was undertaken between 09 February to 21 March 2022 and represents over 14,000 sites. The respondents were composed of 66% CEO or MD level, 31% chair and board level, and 3% senior management level.
