Confidence Rises But Soaring Costs Threaten Fragile Businesses

Leaders of Britain’s top managed hospitality groups remain cautiously optimistic about the future despite spiralling costs, the 2023 Business Leaders’ Survey from CGA by NielsenIQ and Fourth reveals.

The exclusive poll of leaders shows nearly half (47%) feel confident about prospects for their business over the next 12 months, which is a strong recovery from 29% in CGA’s last survey three months ago. Despite this rise in business confidence, 20% of leaders admitted to feeling pessimistic.

Three in ten (30%) leaders feel confident about the eating and drinking out market in general. This is significantly higher than the 8% recorded in the previous survey, but still some way off the 65% that was recorded in January 2022.

The Business Leaders’ Survey confirms hospitality’s resilience despite exceptionally difficult trading conditions. More than four in five (84%) leaders say their business operated at a profit last year, and nearly half (51%) were more profitable than in 2021.

However, many businesses remain extremely vulnerable after three years of disruption from COVID-19 and fast-rising costs, 14% of leaders say their business is at risk of failure in 2023.

The research from CGA and Fourth emphasises the many inflationary pressures facing hospitality. Nearly all leaders say they have experienced higher costs in food and drink (96%), energy (91%) and front-of-house labour (91%), which have led to average increases of 12% and 10% in food and drink menu prices respectively in the last 12 months.

The Business Leaders’ Survey also highlights the pressing need for government support for hospitality in 2023. Four in five (81%) leaders want to see a cut in hospitality’s rate of VAT, and significant numbers would welcome help with business rates reform (61%) and more generous support on energy costs (46%).

Karl Chessell, CGA’s director – hospitality operators and food, EMEA, said: “After battling through three relentlessly challenging years, hospitality leaders are rightly upbeat about their long-term prospects. Pubs, bars and restaurants have coped admirably with the pressures forced on them, and consumers remain as keen as ever to eat and drink out when they are able. However, business confidence still lags well behind pre-COVID levels, and with few signs of respite on costs it is very clear that 2023 will be another difficult year. Hospitality is a dynamic and resilient sector, but thousands of fragile businesses need support on tax and bills if they are to ride out these immense challenges.”

Sebastien Sepierre, managing director – EMEA, Fourth, said: “The hospitality industry remains in a precarious position, despite this survey highlighting a growth in business and trading confidence compared to late last year. Sector businesses are continuing to fight a battle on multiple fronts, contending with workforce related challenges and soaring costs that are hitting supply chains hard. Technology plays a vital role in solving these challenges, helping businesses to engage and motivate employees, drive efficiency across the board, and identify and, ultimately, realise cost savings.”