The UK hospitality industry is once again bracing itself for a wave of cost increases as inflationary pressures resurface and new government-imposed expenses take effect from April 1st.
From soaring food costs to rising business rates and employer National Insurance (NI) contributions, the sector is feeling the squeeze at every turn.
With tight margins already a defining feature of hospitality, these added financial burdens have the potential to significantly impact restaurants, pubs, and hotels across the country.
Here’s why.
Inflation Creeping Back In
After showing signs of cooling, inflation is creeping back into the economy, pushing up the costs of essentials across multiple industries.
For restaurants and hotels, the price of food, energy, and wages continues to rise, forcing many businesses to reconsider their pricing strategies or absorb further losses.
The Bank of England’s continued efforts to curb inflation through interest rate policies have yet to translate into relief for the hospitality industry, most of which is heavily reliant on imported goods and energy-intensive operations.
As a result, operators are dealing with higher supplier costs that are eroding profit margins at a time when consumers are already cautious about discretionary spending.
Government Cost Increases from April 1st
April 1st marks a significant financial hurdle for UK hospitality businesses as key government-imposed cost increases come into play.
Business Rates Hike – The hospitality sector will see a sharp rise in business rates, ending the relief measures that have helped ease the financial strain in recent years.
This is particularly painful for pubs, restaurants, and hotels, where high property costs are already a major expense. The increase in rates will leave many businesses with no choice but to pass on costs to customers or cut back on staff and services.
Employer National Insurance Increase – The upcoming hike in employer NI contributions is another financial blow.
With staffing costs already making up a significant portion of a hospitality business’s expenses, this increase will make hiring and retaining employees even more challenging.
Many operators will be forced to rethink staffing levels or explore automation to reduce reliance on human labour.
With these additional costs looming, hospitality businesses need to find new ways to protect their bottom line. If you haven’t already, things to consider are:
- Menu Engineering: Streamline your menus to focus on high-margin items, replacing high-cost ingredients like beef with alternatives such as chicken, pulses, or plant-based proteins.
- Smart Pricing: Employ dynamic pricing models, create value bundles, and offer seasonal dishes to increase perceived value without reducing profitability.
- Labour Efficiency: Introduce multi-skilled roles and explore automation solutions such as self-service technology or digital ordering platforms.
The Skyrocketing Cost of Beef: A Menu-Changer
One of the most dramatic rising costs in hospitality in recent months has been the surge in beef prices. Supply chain disruptions, climate-related challenges, and higher feed costs have all contributed to a sharp rise in beef prices, creating a major problem for steakhouses, burger chains, and restaurants that heavily feature beef on their menus.
Resturants will have to either absorb these costs, significantly increase menu prices, or switch to alternative proteins. While chicken and plant-based options have been growing in popularity, many businesses will struggle with the brand impact of reducing beef offerings or dramatically increasing their pricing.
Here, flexibility is key, businesses can mitigate the issues by working with Trade Together to diversify supply sources and reduce dependency on volatile imports. We can also secure volume discounts and better payment terms to support you through the surge.
The Road Ahead
With costs rising across the board, UK hospitality businesses are facing difficult choices.
Price increases for customers seem inevitable, but with consumers also feeling the financial strain, there’s a limit to how much restaurants, pubs, and hotels can push without risking a drop in footfall.
Some businesses are exploring efficiency-driven solutions, such as streamlined menus, reduced operating hours, or renegotiating supplier contracts. Others are looking at automation and digital solutions to cut costs while maintaining service levels.
One of the most effective strategies for managing these financial challenges is partnering with a group buying service. By pooling resources and purchasing power, businesses can access the best possible pricing on essential goods and services, ensuring long-term sustainability in an increasingly expensive marketplace.
Other avenues to consider are:
- Tax & rate relief strategies: Seek expert advice on rate appeals or government support available to your business.
- Optimise opening hours: Match operating times to peak demand periods to reduce your overhead.
- Launch loyalty Programmes: Drive repeat visits through exclusive offers, build customer retention and offset customer acquisition costs.
The hospitality sector has weathered many storms, from Brexit to COVID-19, and while these new financial pressures present another significant challenge, innovation, adaptability and working together will once again be key to survival.
How Trade Together Can Help Hospitality Businesses
In an era where every penny counts, we provide a valuable advantage to hospitality businesses looking to weather the storm of rising costs.
Trade Together is a group buying service designed to support hospitality businesses in reducing costs and improving supply chain efficiency. By working with us businesses gain access to:
Bulk Purchasing Power – Lower prices on food, beverages, and essential supplies.
Supplier Negotiation – Exclusive deals with top suppliers, reducing costs across the board.
Operational Savings – Discounts on utilities, insurance, and essential business services.
We are committed to providing hospitality businesses in the UK with the right support, including cost-saving strategies, to ensure that they can navigate the road ahead with confidence. Get in touch with Katie to chat through how we can help you to reduce the squeeze.
