Yorkshire’s hospitality industry has no appetite for further cost increases: Sally Appleton
Millions of UK workers have recently received a significant pay rise and whilst this is welcome news, there are certain industries that Yorkshire’s economy is heavily reliant on, that are going to really feel the pinch.
Hospitality is one such industry that employs tens of thousands of people in Yorkshire, but the sector has little appetite for the big increases in the National Living Wage, the National Minimum Wage and National Insurance, that Chancellor Rachel Reeves unveiled during last October’s budget.
From April 6, the threshold at which Employer National Insurance is payable dropped from £9,100 to £5,000 per year, in addition to an increase in the headline rate for Employer National Insurance from 13.8 per cent to 15 per cent.
Plus, the National Living Wage increased by 6.7 per cent, from £11.44 to £12.21 per hour, for those aged 21 and over and the National Minimum Wage soared by a record 16 per cent, for those aged 18 to 20, from £8.60 to £10 per hour.
A lot of these people work in the retail, leisure and hospitality sectors, which as a result now face significantly increased costs. The hospitality industry in particular is already on a knife-edge, with more than 450 pubs, restaurants and cafes closing in Yorkshire between 2022 and 2024, according to trade body, UK Hospitality, and things could get worse before they get better.
The reality is that most hospitality businesses can’t simply pass on these costs by putting their prices up. Food, drink, high interest rates and energy costs have already seen prices soar in pubs, bars, restaurants, cafes and hotels, so the market is already price sensitive.
There’s a limit to what most people will pay for what are effectively luxury items, whether it’s a glass of wine, a pint, a coffee, a lunch out or even a sandwich. Already the cost of these things is a talking point for lots of people when they go out, because prices are close to, or even past, what many people are prepared to pay, especially when their own disposable income is under strain.
Lots of these businesses will struggle to stay open this year without accurate planning and cashflow forecasting. In addition, we’re working with clients to look at where efficiencies can be made, in terms of both their operating costs and operations, right down to looking at how labour-intensive and profitable individual menu items are.
A growing number of forward-thinking businesses are also exploring how investing in AI could help them to deal with both the supply of labour and the increased cost of that supply.
Crucially, one thing that Yorkshire’s hospitality businesses have on their side is everything that our county has to offer, including its stunning natural landscapes, rich history, vibrant cities, stunning coastline and a thriving cultural scene.
This means that as well as having a captive native audience, Yorkshire will always attract visitors and tourists from across the UK and beyond, who are all keen to receive a large serving of Yorkshire hospitality.
It’s a critical time and we are supporting these businesses however we can, to make sure they are able to stay open and that ultimately has to be a priority for the whole region right now.
Sally Appleton is a partner at independent accounting firm Saffery.