What the state of politics means for hospitality

There’s no question we are going through a phase of political upheaval. After the mini-budget U-turn and the resignation of our now ex-prime minister, the political landscape is changing and changing quickly. Here is a snapshot of how the state of politics in the UK is affecting the industry.

Energy support for businesses is in question

Plans for energy support set out in the mini-budget have been reversed by newly assigned Chancellor, Jeremy Hunt in an attempt to steady the market. The energy support for business is now expected to finish in April 2023 instead of lasting the two years promised in the original budget. According to Proof Insights ‘the lack of uncertainty is forcing hospitality companies to curtail investment plans for 2023’. However, it is likely that there will be some level of assistance for businesses outlined in future iterations of the budget. The Treasury is conducting a review into energy crisis to design a new, more targeted, approach. This is intended to cost the tax player less than the original plan outlined by the outgoing Chancellor.

“For hard-pressed consumers, this will mean a significant increase in the price of their favourite drinks at a time when our pubs, restaurants and shops are all struggling to manage increasing costs and keep their doors from shutting for good.”https://t.co/COE8COOf2o

— The Morning Advertiser (@morningad) October 20, 2022

Alcohol duty freeze has been reversed

The initial freeze on alcohol duty, which would have taken affect between February 2023 and February 2024, was implemented over concerns for the future of the industry. However, alcohol duties are now set to increase with inflation – presently 12.3% meaning that the price for a bottle of spirits could cost an additional £1.35, a pint of beer an additional £0.07 and a bottle of wine an extra £0.38. This turnaround is expected to save the government £600 million a year. However, prior to the PM’s departure Jeremy Hunt had revealed plans to assess and possibly overhaul alcohol duty by August 2023. At this time, alcohol duty is based on both the drink’s category and the alcohol per volume. However, many predict a system which is focused on ABV and not category of drink.

Customers are feeling the pressure

One of the major challenges faced by the industry is a consumer base under financial pressure. 91% of customers are concerned with affording household spending, especially paying their utility bills. Older consumers are more likely to be concerned about household expenditure, while those under 35 are more likely to worry about spending on food.

A worrying amount of 20% of people think they will experience the UK’s economic difficulty for another 2 years. This could mean that pubs, bars and restaurants may not reach previous profit levels for the years to come.

The good news for the trade

However, the news is not all doom and gloom. The on-trade is predicted to remain resilient in the face of these economic challenges. Current data from Proof Insights suggests that, despite anxiety around the cost of living, consumers are ramping up spending as we head towards Christmas with 30% of people spending more on eating and drinking out in September than they did in August. It seems customers are more likely to prioritise going out, over any other spending. 69% of customers say it is ‘the treat they most look forward to’.

We need urgent return to stable leadership and governance to underpin confidence for businesses, workers and consumers. We need a unified approach from all sides to deliver that https://t.co/SiDAKUMg3N

— Kate Nicholls OBE (@UKHospKate) October 20, 2022