"Smaller businesses, they're on their own"

Chefs including Luke Selby, Paul Askew, Andy Lennox and more hit out at challenges affecting the UK’s hospitality sector.

Despite being an essential contributor to the nation's economy, the UK’s hospitality industry is currently facing numerous challenges placing great strain on small and large operators, according to Luke Selby, Paul Askew, Andy Lennox and more.

Rising costs, extortionate VAT and business rates, and a staffing crisis, have caused major concerns whilst making it increasingly difficult for hospitality firms to maintain profitability and deliver quality services.

INCREASED BUSINESS RATES AND THE VAT HELL

One of the significant challenges faced by UK hospitality firms is the escalating costs associated with VAT.

With the standard VAT rate set at 20%, one of the highest in Europe, this tax applies to various hospitality services, such as accommodation, food, beverages, and entertainment.

The burden of VAT affects the businesses' bottom line and forces customers to reconsider their spending habits, resulting in reduced demand for hospitality services.

In recent years, following the COVID recovery, the ongoing cost of living crisis and a decline in trade; calls have been made from groups and individuals for government to reduce VAT to help struggling firms including Andy Lennox founder of The Wonky Table.

Highlighting rising interest rates and inflation, Andy said: "Increasing interest is NOT helping bring down inflation. It's seemingly keeping inflation high. This might be good for the VAT man by driving prices up but it's destroying businesses #cutthevat."

Increasing interest is NOT helping bring down inflation. It's seemingly keeping inflation high. This might be good for the VAT man by driving prices up but it's destroying businesses #cutthevat

— Andy Lennox (@andyjlennox) June 22, 2023

As well as VAT, business rates pose another significant hurdle for UK hospitality firms.

These rates are calculated based on the rental value of non-residential properties, including hotels, restaurants, and bars. In prime city center locations where hospitality businesses thrive, the rates tend to be high, squeezing already slim profit margins.

Paul Askew, Chef Owner of the Art School in Liverpool, explained that venues across Liverpool are facing closure, with other cities and areas of the country being no different.

"Every week in Liverpool, independent eateries announce their closures. For many hospitality operators across the UK, there’s nothing left in the bank, no room to manoeuvre, instead faced with a litany of costs going up in pretty much all area of the industry," explained Paul.

He added: "We continue in our belief that a VAT reduction would help enormously, certainly to 15% or 10%. Such a difference now, for many restaurants, bars, hotels, clubs, and pubs, is going to be the literal difference between surviving or failing, as consumers are forced to make ever tougher spending decisions based on diminishing incomes."

 

 

 

 

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STRUGGLING SMES AND INDEPENDENT BUSINESSES

SMEs and independent hospitality businesses are particularly impacted by rising costs, VAT, and business rates.

Speaking to the Guardian newspaper, Mandy Yin Chef Owner of the Sambal Shiok, a Malaysian Laksa bar in North London, explained that rising costs are compounding the challenges faced by small restaurants.

Mandy explained to the Guardian that Inflation has driven up the prices of essential ingredients, making it harder for businesses to maintain profitability.

"We desperately and urgently need a lifeline from the government. For instance, why are we charging 20% VAT on all sales? It is clear that the government believes that Covid is done and everything is back to normal for hospitality. It is not," she explained.

Mandy added: "In the absence of policy change, all I can say is, please support independent restaurants, cafes, bars, food trucks, producers, and grocery shops as much as you can afford to and be kind while you’re doing so. You’ll miss us when we’re gone."

Whilst countless SMEs and independents are forced to close, larger establishments with greater cash reserves are faring much better, often to their unique positions and extensive financial backing.

Luke Selby, Executive Chef of Raymond Blanc’s two Michelin-starred Le Manoir aux Quat'Saisons, discussed the unique position his restaurant finds itself in on Grilled! a podcast by The Staff Canteen.

During the podcast, describing Le Manoir’s position within the industry, Luke explained: "We're in a very fortunate position at the Manoir where the business that Raymond has created over the past 40 years, is a mature business. It’s at a consistent price point, the infrastructure, the staffing level now, the amount of covers, it’s very consistent."

Luke added: "A bigger business can absorb a lot of inflation and recession and things like that. With Le Manoir we're in a very fortunate position compared to smaller businesses, they're on their own."

Whilst SMEs and independents continue to face economic and political havoc, the competition from the larger multinational food and drinks chains is only creating a more unequal and testing environment.

Luke explained: "All of them will have a factory off site where everything gets bulk ordered and then sent out back to the different chain outlets. How can a little restaurant compete with the two different opposite ends of the price scale if you're the middleman, and you're trying to cater to a local family neighbourhood restaurant, it's difficult."

The UK hospitality industry is struggling with rising costs, specifically VAT and business rates, which pose a threat to its vitality.

These expenses not only squeeze profit margins but also deter consumer spending, hampering the growth and sustainability of the sector.

To ensure the resilience of the industry, it is vital for the government to address the concerns of hospitality firms and take steps to alleviate their burden.