A catastrophe like lockdown, so tomorrow new PM must take TWO vital steps to save livelihoods
THE cost of living crisis which is affecting everyone in Britain is apocalyptic, possibly more catastrophic than lockdown. And in the hospitality industry – the business that I truly love – there are people saying: ‘As much as I adore my business and this industry, it doesn’t make sense and I am just going to shut up shop.’
So, we need to act, and soon. The new Prime Minister, revealed tomorrow, needs to put this at the top of his or her priorities. We need to cut VAT for hospitality and we need to cap energy costs for businesses.
Otherwise, we are going to lose these businesses. The only thing keeping some people afloat at the moment is that they are on their old energy contracts. When these go up, that’s it.
You are working your a*** off and not making any money as the numbers don’t stack up. The only thing we can do to make it work is put the prices up. Then, of course, the danger is that people go somewhere else or, because they’re also facing increased bills, they just don’t go out at all.
There’s a bit of a Mexican standoff in hospitality at the moment over who’s going to put their prices up first. Who’s going to be the first person to charge £20 for a burger? Because right now, if you’re not charging that, you’re probably not making your margin you need to sustain the business.
Our restaurant in Bridge of Allan,
Stirlingshire, burned down last year and so we’re currently rebuilding it. We are taking the opportunity to try to cut every cost. We are putting a heat exchange in the kitchen that will transfer heat to the dining room. We will have induction cooking, which is more efficient than gas, and LED lighting.
But if the energy companies keep increasing charges, no amount of saving can make it viable. Previously, utility bills were 4 per cent or 5 per cent of costs and they could now be up to 15 per cent or 20 per cent. For businesses on tight profit margins, it will be the death knell.
Businesses are already on the brink. At our re-opening restaurant, we are being told by suppliers that, if we don’t get our orders in now, they can’t guarantee they’ll be able to meet them.
Hospitality has just been through Covid lockdown and it’s been incredibly difficult. We’ve taken our bounceback loans and, so, we already have extra pressure on our businesses.
We had that nice period where VAT was only 5 per cent and business rates were deferred and that got us back up on our feet.
But it has gone nowhere near to giving us back what we lost during the pandemic. We all lost a lot of money and didn’t make it back in the last eight months, so we are already weakened.
If businesses have a bit of cash in the bank, that might help them ride it out. But we are already lean, there is nothing left to cut.
The current position, before I even get on to utility costs, is that we are facing labour costs which have risen for a number of factors, including that, during lockdown, a lot of colleagues returned to their homelands in Eastern Europe. Staff, including chefs, got used to spending Saturdays with their families and didn’t want to give that up when they realised they could get £12 per hour as a delivery driver instead.
Everyone is struggling to get staff and the only way to do it is to increase wages. This might sound like a good thing, and of course it is, but it means increased costs and these have to be met.
Material costs are up too. Lamb has doubled in price in the past three months. About six weeks ago, I was paying about £15 per kilo for lemon sole fillets. A fortnight ago it was £30 per kilo. This is a knock on effect of increases in the fisherman’s costs. Diesel prices are going up, so it’s more expensive to fish, so the supply goes down, and the price goes up. The cost increases are pushed down the chain.
Now we have cost of living increases and nightmare utility charges. We got the utility bill for our restaurant in Port of Menteith, Perthshire, fixed for 12 months in May at £24,000 for the year. This is up from just under £9,000 so it has almost trebled. However, the £24,000 could, in turn, treble to
It’s nowhere near giving us back what we lost during the pandemic
You end up being a busy fool if your costs are more than your income
£75,000 in the future. These types of increases are just not affordable.
Margins in hospitality are tight, at around 15 per cent, so with the increases in labour, materials and now utilities, you can end up being a busy fool if your costs are the same as – or more – than your income.
There are things that can be done. The scariest thing is that, while domestic energy prices have a cap, even if it’s going up, there is no cap for commercial premises. That needs to be changed. Then there is VAT and I would call on the government to look at reducing VAT for hospitality to, say, 12.5 per cent or even just 10 per cent .
It’s vital to remember that it’s businesses that employ people, that give people money to pay their mortgage and to spend. It’s how tax revenue is generated, helping to sustain schools and the NHS. If these people don’t have a job they are lost to the benefits system and the cost to the country is enormous. So it’s in everyone’s interest to keep the lights on.
Hospitality wasn’t a great place to be in during lockdown and it’s not a great place to be now. We are getting absolutely crushed by these rising costs. It’s better to take a cut in tax income per business than lose businesses and end up getting nothing from them.
It’s not like in hospitality that we can turn stoves on a bit later or run the fryers a bit colder. We need all that kit on all the time. If a customer comes in and says they fancy a steak and we tell them it’ll be an hour till we get the grill on and get everything ready, they’ll probably decide to go elsewhere.