Soaring inflation rates and energy bills, particularly in the UK, have been triggered by a combination of supply chain issues off the back of the pan- demic, followed by the Russian invasion of Ukraine earlier this year. For hospitality, inflation acts as a deterrent for consumers who are not only seeing the price of a pint rising, but having to prioritise other basic living costs and turn to drinking at home more regularly. Combine this with venues struggling to pay energy bills and we could see many bars, pubs and restaurants not survive the winter.
Countries all around the world are suffering from the cost of living crisis, but the UK in particular is in an uncomfortable position. Not only have fuel costs rocketed after sanctioning Russian providers, Brexit and the devaluation of the pound are making things extra tricky to deal with. However, with new prime minister Liz Truss at the helm, the hospitality sector could be thrown a lifeline.
In August Sacha Lord, an economic adviser in the UK, urged the government to show support for hospitality, with some venues expecting extra costs to equal £20,000 by the end of the year. In response, Truss has used the energy crisis as her main manifesto point and when she addressed Commons in early September, she announced a six-month plan to cap both domestic and commercial fuel bills, which will be assessed in three months.
During her speech she described hospitality as “valuable”, although simultaneously told venues to “improve energy efficiency and increase direct energy generation”. While bordering on the patronising, it also suggests the support package may be a little frugal.
Nevertheless, the domestic energy caps which Truss plans to execute will likely encourage people to venture out more once they have basic amenities covered. Whispers that Truss also plans to cut £30bn in taxes would free up some spending money, although this is more likely a short-term solution and could in fact encourage further inflation in the long term.
While trade bodies will always want more, the initial proposals put forward by Truss will be a relief to many independent bars and pubs across the UK. But despite the helping hand, hospitality will once again be the biggest victim. Distributors and importers will revise their pricing structure and if people stop going out then drinks companies will reposition themselves to target at-home drinking – something they’re well versed in dealing with after adapting to lockdowns over the past couple of years. These are the luxuries most bars and pubs do not have.
