HOSPITALITY COSTS RISE SHARPLY AS SECTOR UNITES BEHIND RATES REFORM

14 August 2024

The latest hospitality industry survey for Q3 2024 has revealed how almost every hospitality business in the UK has seen steep increases in wages and food costs, with businesses in Northern Ireland found to be more pessimistic about the future of the sector than their GB counterparts.

Year-on-year, 96% of hospitality businesses have experienced increased wage costs in Northern Ireland, a new survey by the Hospitality Ulster, British Beer and Pub Association, British Institute of Innkeeping, and UKHospitality has found. It’s a similar story on the cost of food and drink (93%), insurance (94%), and energy (61%). A greater proportion of Northern Ireland hospitality businesses were found to have experienced increased costs in each category when compared to their equivalents in Great Britain.

As new inflation figures reveal today, inflation in hospitality remains notably higher than the headline rate would suggest.

Northern Irish hospitality businesses are overwhelmingly in favour of a reduction to VAT rates for hospitality and the reforming business rates, the latter of which is a Labour Party manifesto commitment, to help reduce costs. While this must be a priority at the Budget, the NI Assembly would also have to mirror any reform as business rates are a devolved matter.

93% of respondents in Northern Ireland stated that VAT reductions and 69% stated that full business rate reform would have positive impacts on their business.

The results of the survey also found hospitality businesses in Northern Ireland to be more pessimistic about the future of the sector when compared to British hospitality businesses, at a rate of 40% versus 37%, and owners more pessimistic about their own businesses when compared to those in Britain, at a rate of 36% versus 35%.

Colin Neill, Chief Executive, Hospitality Ulster, said:

“The results of this survey will not be a surprise to anyone involved in the hospitality sector in Northern Ireland. While hospitality in the UK as a whole has suffered due to inflation, our members have been found to suffer at a higher rate across all cost categories, from wages to food and drink, and energy costs.

“Northern Ireland has the highest energy costs of anywhere in Europe. Local business rates poundage levels are also much higher than in Britain, with many council areas here higher than the City of London. Couple that with the fact that our businesses are not subject to the same 75% rates relief initiatives as their counterparts in England and it is no wonder that both cost increases and pessimism for the sector were found to be higher in Northern Ireland.

“The lowering of VAT rates for hospitality also remains a key lever for easing the costs of doing business. All Executive parties in NI have signalled their support for doing so. While we appreciate that this would ultimately be a Westminster decision, we call on the Department of Finance to commission independent research into the effect this could have on our local economy as a means of informing the conversations they now must have with the new Labour government on this matter.”

In a joint statement, the trade bodies said:

“It’s crystal clear there is an overwhelming desire from the hospitality sector that the Government rapidly delivers on its manifesto commitment to replace business rates and reduce the burden on high street businesses.

“Hospitality continues to remain an outlier sector, with costs continuing to rise sharply compared to the rest of the economy.

“With cost increases affecting almost every venue, this vital sector is being prevented from investing in businesses and communities, which would boost economic growth and new jobs. Instead, they’re having to use all available cash just to pay the bills.

“The clock is ticking, with a cliff-edge looming on April 1 when relief ends and rates are set to increase again. Inaction would see bills spiral and venues under increased threat of closure.

“Alongside our members, we hope to see clear and decisive action toward delivering on its manifesto commitment from the Chancellor at the Budget in October.”