UK restaurants already fear the bill, but budgets have risen again, warns restaurateurs | hospitality industry

Nothing spoils an evening more than a line of bigger bills.

But leading figures in the hospitality sector are concerned that Labor could clash with guests over fair meal prices as they table their first budget in 14 years.

Neither side has much room to maneuver.

Despite easing inflation, prices are still rising and consumers still bear the scars of a cost-of-living crisis that has eaten away at their disposable income.

Few will accept what one restaurateur in a chain calls expensive mediocrity, having raised prices to a level that suggests it has relatively little to offer the discerning gourmet.

Figures from Barclays show people are choosing Netflix over Nocellara Olive. While dining out spending was flat in October, digital subscription spending increased 10%.

Darker evenings and colder temperatures may play a role, but so too can conditions that make it difficult for hospitality to thrive.

Rampant inflation has already left bars and restaurants facing painful choices as they stumble to find secure footing after the pandemic. Either raise prices to protect razor-thin margins, or take losses to retain customers in the hope that the situation will ease.

That devil's bargain included measures introduced by the new prime minister, Rachel Reeves. Industry leaders say the bill, if introduced, would mean much higher prices.

According to UK Hospitality, it will cost an extra $2,500 to hire a full-time employee from April due to increased employer National Insurance Contributions (NICs) and the minimum wage rise.

Last weekend, the sector's main trade body heaped pressure on the government by sending a letter to the Prime Minister signed by more than 200 hospitality bosses claiming rising costs would cause unprecedented damage, including the closure of small businesses and rapid job losses within a year. I raised it. Investments were cut and canceled.

Rachel Reeves leaves 11 Downing Street, London, carrying a ministerial red box before delivering the Budget. Photo: Jordan Pettitt/PA

The only solace for the sector has been vague promises to lower business rates, a system that most hotel industry leaders believe needs a complete overhaul. It won't even be necessary until 2026 at the earliest.

Tim Martin, the outspoken boss of JD Wetherspoon, estimates the 800 pubs and 50 hotels he operates will cost an additional $60 million a year, which accounted for most of the company's profits last year. It's a big enough amount to blow away.

The budget will put a lot of extra pressure on a sector that has been quite vulnerable after warning of price rises as a result, he said.

Even the owners of Lancashire gastropub Parkers Arms, who, unlike Martin, are committed socialists, say the extra costs will be difficult to manage.

It seems [Reeves] Stosie Madi said she took into account those who really needed help. People have to pay for the NHS.

But she is a bit naive in boldly imposing taxes on us who are still powerless by a government that has just disappeared.

A two-hour drive east, Neil Bentinck, executive chef and owner of Skosh in York, recently introduced a new early Saturday seating, taking advantage of staff who were already scheduled to be on site.

It was meant to increase profits, but now the extra revenue just offsets the extra costs. [of the budget]he said

Like many in the industry, Bentinck is wary of complaining about external circumstances.

There is always a demand for high-quality food as long as diners feel they are getting their money's worth, he said, noting that Skosh is still fully booked at $70 per person.

Bentinck feels some sympathy for consumers who think twice before eating out at a restaurant that doesn't make every effort to offer good value.

Restaurateurs are concerned that hiring staff is becoming too precious. Photo: Maureen McLean/Rex/Shutterstock

The kids wanted steak, so they paid $30 for a piece of meat and half a tomato.

I know that piece of meat costs $3. And a bowl of frozen chips is $5. It is expensive mediocrity and is very widespread.

Chains once considered value nightspots have increased prices by a quarter to offset cost inflation, according to data from Lumina Intelligence, which provides market insights into the food and beverage sector.

From the third quarter of 2023 to the summer of 2024, average prices at Bills rose by 26%, at Wagamama by 24%, at Nandos by 19% and at Pizza Express by 13%.

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The data shows that by fall 2022, the average price of an American Hot from Pizza Express will be $13.48, rising to $16.75, and in London it will be $18.25.

At large chain restaurants owned by private equity investors who care more about profit than good food, there will always be more incentive to squeeze out customers than at smaller, independent restaurants that rely heavily on loyalty and passion for their cuisine.

If investors want X amount of profit, they'll say they have to charge more, Bentinck said.

But even restaurants that offer gastronomic excellence without raising prices are taking a hit.

We have a hearty, hearty menu for 50 people. That's the same price we've had for two years and haven't been able to come up with until now, Madi said.

Many people who would normally choose three courses opt for the walk-in menu and spend $25 instead.

They might have had cocktails before dinner. You probably had dessert wine with your pudding. Now they don't do that. People are watching the coins out there.

Figures from CGA, NIQ's hospitality industry consultancy, back this up. A third of consumers say they are choosing cheaper food and 41% are consuming less beverages. The top five reasons survey respondents cited included not having enough cash in their pockets or not having extra money to pay bills at the end of the night.

In addition to increasing frugality, even less forgivable behavior on the part of consumers, such as no-shows – where a customer books a table but never shows up – is at an all-time high.

Tim Martin has invested additional money into JD Wetherspoon's 800 pubs and 50 hotels 60m away. Photo: Martin Godwin/The Guardian

Understandably, business leaders began to feel discouraged, caught up in the narrow movements of higher costs and more cautious consumers.

Only 20% of hotel industry bosses said they were confident about the future of the sector over the next 12 months, according to a survey conducted by NIQ for CGA. This is almost half of the percentage who felt this way just three months ago (36%).

UK Hospitality estimates its 130,000 member-owned venues will have to increase prices by up to 8% due to budget constraints to cover the extra costs of hiring staff.

But with consumers already opting for box set nights to enjoy their gourmet nights, trade groups say companies cannot risk doing so. Instead, they will avoid hiring and limit growth in a sector that the trade body says contributes $93 billion a year to the economy.

Kate Nicholls, CEO of UK Hospitality, said the best hope for the industry was a change in the way the country perceived its economic situation.

If we can achieve growth and have positive consumer sentiment, this could be what saves the sector.

But she fears the government's continued denigration of the economy may have set it on a loop of destruction, triggering a decline in confidence.

In July, it felt like growth was improving, inflation was lowering, and interest rates were lowering. That's what the Conservative Party said. [during the general election campaign].

As soon as Labor came in, all the talk was that things were much worse than we thought, that there would be a lot of suffering and that finances were in disarray.

When Rachel Reeves and Keir Starmer say something is bad, people get all bent out of shape and see that their spending, confidence and footprint are behind them.

The government needs to talk about the economy.

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