One in five hospitality firms face closure without government support industry body warns

300 hospitality CEOs have signed a letter asking the chancellor to urgently deliver a package of support to help the sector as it faces estimated cost increases of 238%.

Figures from hospitality body, UKHospitality, suggest that one in five businesses fear they will not survive the current crisis. Three in five operators admitted they are no longer profitable. The figures – from a recent survey of hospitality operators – revealed that, on top of energy price rises, the cost of living crisis will cost an anticipated £25bn loss in trade, likely to result in a 15% drop in employment. This is equivalent to 383,000 jobs across the UK.

The survey showed average energy price increases for the hospitality sector of 238%, with more than 70% of businesses seeing bills more than double, and nearly 30% hit with rises of over 300%. The increases mean average energy costs as a percentage of turnover have jumped from 5% in 2019 to 18% today, making energy bills the second largest cost (up from fifth) to businesses, a greater proportion of turnover than rent and rates combined.

As a result, hospitality businesses are having to take drastic action. Three-quarters are being forced to hike prices, more than six in 10 are reducing staff hours, four in 10 are reducing headcount, and half are cutting trading hours.

Following the results of the survey, nearly 300 businesses put their names to an open letter asking new chancellor Kwasi Kwarteng for “a plan that cuts business costs, stimulates demand and tackles inflation”. Just Eat, Marriott International, Mitchells & Butlers, Pizza Hut UK, Caffè Nero and Merlin Entertainments are among the signatories, alongside smaller pubs, bars, restaurants and hotels in England, Scotland and Wales.

The letter proposes a five-point plan of action through to April 2023, with a review in early 2023. Measures include: a 10% headline VAT rate for hospitality; a business rates holiday for all hospitality premises, with no caps applied; deferral of all environmental levies; reinstatement of a generous HMRC Time to Pay scheme; and the reintroduction of a trade credit insurance scheme for energy.

Kate Nicholls, CEO of UKHospitality, said: “The hospitality sector is critical to our national economic and social recovery and with support will be well placed to drive growth, generate jobs and invest in local communities. To achieve this however, the government needs to act quickly to address the soaring energy costs that are strangling the sector.

“We are encouraged by talk of energy price freezes for families and businesses but this won’t be enough to save hundreds of businesses and thousands of jobs in the sector. The package of five measures we are asking for will help us guarantee jobs and wages, to ensure that businesses stay afloat, and to preserve and grow our communities across the UK.”

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