Editor’s Viewpoint: Five Months of Rising Prices – A Perfect Storm Brewing for Hospitality

By Peter Adams, Editor, CLH News.

As we approach what should be one of the most lucrative trading periods of the year, the sector faces a sobering reality: hospitality food and drink prices have now risen for five consecutive months, with no indication that this relentless upward trajectory is set to reverse course.

Halloween is just weeks away, followed swiftly by Guy Fawkes Night, and then the crucial Christmas and New Year period – traditionally the golden quarter for our industry.

Yet operators are being forced to navigate these prime trading opportunities whilst battling persistent inflationary headwinds that show no signs of abating.

What makes this situation particularly alarming is the double-edged sword we’re facing. Not only are costs climbing month after month, but KPMG’s latest Consumer Pulse survey reveals that mounting inflation is causing consumer confidence to fall, with UK economic confidence reaching its lowest point of the year in the last quarter. Our customers are feeling the pinch just as acutely as we are.

Regular readers will know I’m a devoted admirer of the legendary American economist Milton Friedman, who astutely observed that inflation is “the one form of taxation that can be imposed without legislation”.

I’m no economic expert, but what I’m witnessing appears to be a textbook case of what economists call fiscal drag. When tax thresholds and allowances aren’t adjusted in line with rising prices, workers find their incomes pulled into higher tax brackets without any official rate increase – paying more tax whilst their real purchasing power diminishes. #

Meanwhile, higher prices automatically boost VAT receipts for the Treasury. Those of us old enough to remember the 1970s know precisely where this path leads, and it wasn’t pretty.

Something has to give, and urgently. The starting point must be our crippling energy costs. UK businesses are paying 60% more per unit of electricity than their European counterparts – this is simply unsustainable for any sector, let alone one as energy-intensive as hospitality.

With the Budget looming, the pressure on government to address this disparity must be maintained and amplified.

On a related note, I was recently in Liverpool for the Labour Party Conference. Across the Mersey in New Brighton – where I spent many happy childhood days – I learned of a publican who’d rebranded his establishment in opposition to government proposals for digital identification, drawing parallels with Orwell’s surveillance state in 1984.

I share those concerns (but will leave that for another day) about digital ID and was disappointed not to have had time to visit and hear their views firsthand. It’s firmly on my list for my next Merseyside visit.

The hospitality sector has weathered countless storms, but this perfect convergence of rising costs, falling consumer confidence, and fiscal pressures demands immediate and decisive action in next months budget.

I am reminded of that great quote attributed to a famous scientist “The definition of insanity is doing the same thing over and over and expecting different results”

Current policy is not working and won’t work in the future,  the hospitality and on-trade sector deserve better than to be squeezed from all sides whilst trying to deliver the experiences that bring communities together during our most cherished seasonal celebrations.

I would encourage all our readers to follow us on X/Twitter @CLHNews and visit our website at www.catererlicensee.com to sign up for our twice weekly e-newsletter.

I can always be contacted at edit@catererlicensee.com