British people are currently living through a well-documented cost of living crisis. Brexit, the war in Ukraine and the after-effects of the COVID-19 pandemic have combined to push up energy and food prices, leaving many people struggling to afford either.
This is inevitably having a knock-on effect on the hospitality industry. Businesses are faced with increasing costs, with many having little choice but to pass this on to the customer. With news such as nights out becoming ‘considerably more expensive’, many people are choosing to avoid going out and spending their money on things that aren’t deemed a necessity.
The effect on businesses is therefore two-pronged. Not only are many struggling to source supplies and workers while paying rising bills and wages, but the need to pass on these increasing costs to the customers often means that they lose customers.
Nowhere else is this effect felt as strongly as in food businesses. According to Reuters, Restaurant Group Plc., who operate Wagamama’s and Frankie & Bennie’s, project that food and inflation will reach between 9% and 10% this year. This inflation feeds directly into ingredient prices, with the price of some spices having “risen up to 50% in some cases”. In an interview with MailOnline, Yawar Khan, chairman of the Asian Catering Federation, said that the price for lamb “has gone up 20%”, adding that “chicken has gone up about 20 to 25%”.
In a recent statement, Karen Betts, Chief Executive of the Food and Drinks Federation, admitted that food and drink prices had risen “more than food and drink manufacturers had feared”. She says that “ingredient price rises have been relentless for more than a year now”, adding that “the pressures on both large and small businesses are immense”.
The reasons for the recent cost-of-living crisis have been covered extensively in the news; unsurprisingly, the same factors are driving up prices for small and large businesses. Betts attributes these rises to “pressures in the global supply chain caused by the COVID-19 pandemic” and the war in Ukraine, as both Russia and Ukraine are “Russia important suppliers of commodities like wheat and food oils, as well as energy and fertiliser”.
Jim Winship, head of the Pizza, Pasta and Italian Food Association, agrees with Betts. “It’s everything really; a lot of shortages in supply, concerns over the limited supply of fertiliser, which will affect the production of many crops. The war in Ukraine is a big issue; there’s usually a grain harvest there, so that’s going to create a shortage around the world”.
“Prices are just rocketing up. If you look at pizzas, they’re going to be affected by flour shortages. Chicken has gone up hugely, pork farmers are losing money at the moment; we have an issue getting tomato sauces and those sorts of things that tend to come from Spain and Italy. Pretty much everything you can name in terms of food ingredients is going up in price.
Both Betts and Winship are keen to highlight how rising energy costs and staffing problems are also affecting businesses. “We’ve got shortages of staff, both in factories and in bars, cafés and restaurants. People won’t be aware of some of the shortages, things like paper, for example. It’s pretty much everywhere”, says Winship.
Betts’ statement adds that the hospitality sector is “in particular, impacted by the significant rises in energy costs”, highlighting how “over 60% of food and drink manufacturers are reporting that energy price rises are impacting their operations. Meanwhile, wages are rising too with labour shortages right across our sector taking hold”.
In much the same way as the public have been calling on the government to alleviate the cost-of-living crisis, the FDF’s statement says that it is vital that “industry and government work to ensure the cost of doing business is as low as possible, for instance minimising the cost of new and existing regulation, with a view to responding to shortages in supply”. The problem here is that many of the factors affecting business are, in reality, out of the government’s control, and the government is currently focusing on helping people over businesses. The recent announcement of a £400 discount on energy bills was welcome, but was not accompanied by any measures to help business. Michael Kill, CEO of the Night Time Industries Association, said that businesses were hugely disappointed and frustrated” at the lack of action, amid calls for a VAT reduction (to 12.5%) and an energy price cap.
The unfortunate reality, like that for many people living in the UK, is that it is difficult to see where the crisis ends. “It’s a difficult situation for everyone at the moment”, says Winship The whole world seems to have gone mad; we’re expecting price rises to continue into the autumn, but beyond that it’s difficult to predict. You can’t predict where the shortages are going to be, as they can come rapidly from nowhere. It’s a nightmare scenario to be honest”.
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