Profitability plummets in pubs

Rising prices for energy, goods and labour has resulted in profitability of hospitality business plummeting.

Just 37% of businesses surveyed by the British Beer and Pub Association, the British Institute of Innkeeping and UKHospitality are currently turning a profit, with energy in particular eating into margins. 

The price of goods and labour are also factors. Earlier this month the BBPA warned that staff shortages are reaching critical levels, and could cost the sector £21bn in lost trade.

The new survey shows 45% of businesses have been forced to reduce opening hours to avoid closing permanently, while one in six report they have no cash reserves. Just 28% are currently considering investing in their businesses. 

The findings come almost a year after the government released its hospitality recovery strategy, which aimed to increase the resilience of the sector by improving profitability and putting pubs, bars, and restaurants at the heart of plans to revitalise local economies after the pandemic. The strategy included measures to help the sector build back better and greener from the pandemic.

However, the picture for hospitality businesses remains bleak, said the three sector groups involved in the research. “Given the chance, our industry has huge growth potential and the ability to play a critical role in the levelling up of communities in every single part of the UK, but instead we are still struggling to get back on our feet properly after a turbulent two years,” a joint statement reads.

The group highlighted three priorities to put the sector back on track: tackling the current inflationary headwinds facing the sector; reforms that would unleash growth potential and a new tax and investment regime that facilitates a resilient and productive hospitality sector. Their members “can’t hold on forever”, the groups warned.

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