The hospitality sector faces steep price increases after Christmas, with restaurants, hotels, and bars expected to raise prices three times before April 2022.
Speaking at the Environment, Food and Rural Affairs Committee, UKHospitality CEO Kate Nicholls said an inability to increase prices before Christmas would lead to inflationary pressure that could cause higher prices.
She said: “For a lot of our Christmas activities, a lot will be sold and rolled over from last year, so the price is more inflexible.”
“Therefore, you’re going to see a really intense squeeze on margins in the run-up to Christmas, and then an inevitable impact felt by consumers because it will have an inflationary effect.”
With significant cost price inflation coming through the supply chain, Ms Nicholls added, consumer prices would be hit hard after Christmas.
“Some of our businesses are expecting three price increases by April,” Ms Nicholls said.
Chancellor Rishi Sunak faces paying out an extra £5.4billion in debt interest next year as inflation looks set to hit a 30-year high.
The return of the 20% VAT rate at the end of March could see hospitality become more expensive when VAT returns to 20% in March 2022 from its current 12.5%, warned Ms Nicholls.
“The biggest thing the government could do to help the hospitality sector government short term is to maintain the 12.5% VAT, then we can invest in our product, our people and grow our way out of this,” she said.
Ms Nicholls added that supply chain issues meant around 20% of products in all deliveries were not being delivered and there was no guarantee the situation would resolve by Christmas.