Hospitality businesses are among the highest contributors to inflation growth in December as the Consumer Prices Index (CPI) rose by 4.0% in the 12 months to December 2023.
This marks an increase from the previous rate of 3.9%. CPI by category for December 2023 shows Alcohol & Tobacco rose to 12.9% with Food & Drinks at 8% and restaurants & hotels at 7%.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), said this was impacted by “rises in tobacco prices due to recently introduced duty increases.”
”These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year,” he added.
“Meanwhile, the prices of goods leaving factories are little changed over the last few months, while the costs of raw materials remain lower than a year ago.”
Kate Nicholls, chief executive of UKHospitality, has warned that high business costs that remain a significant part of the economy, risk reversing a downward inflationary trend.
“This rise in inflation, albeit slight, will come as no surprise to those of us that have been warning the endless rise in business costs risks an inflationary spike at the start of this year.
With the National Living Wage also set to increase in April, hospitality venues will ”have no choice” but to pass these costs onto consumers once again fuelling inflation, she says.
“Businesses have absorbed costs as much as they can but with food inflation remaining at 15%, wage costs continuing to rise and the impact of the cost of living being felt in customer demand, they can do so no longer.
“We need action to mitigate these cost increases. In the short-term, the Government should cap the business rates hike due in April. Looking to the years ahead, a reduced rate of VAT for hospitality will increase demand, grow sales and keep prices low.”
Meanwhile, Prestige Purchasing operations director, Stuart Reed said that a first time rate increase since February 2023 would cause some concerns that the market may be heading back into a period of rising inflation.
“But will this unexpected rise translate to food, and will hospitality businesses see a rise in inflation numbers as well? Thankfully, this appears to be unlikely,” he said.
”The CGA Prestige Foodservice Price Index is also expected to fall in December, dropping between one to two percent from November’s 15% year-on-year.
“This would mark a sixth consecutive month of falls in inflation, a trend expected to continue until at least quarter 3 of this year.”
Emma McClarkin, chief of the British Beer and Pub Association stressed the impact of these pressures on the sector.
”The increase in Dec inflation underscores the unrelenting cost pressures faced by the beer&pub sector.
”Important the Chancellor tackles the tax burden our sector faces & continues to invest in breweries & pubs at Spring Budget,” McClarkin said on Twitter.
Jeremy Hunt, the chancellor, has added, “As we have seen in the US, France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it.”
