Booming wage costs ‘risk future investment in foodservice employment’

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The ALMR, BBPA and BHA have warned that increasing wage costs could threaten to undermine further investment in staff and employment opportunities in the foodservice industry.

The National Living Wage cost the industry around £34 million per year in 2016 with the increase to £7.50 this year adding a further £52 million, an average of around £1,600 for every pub.

ALMR Chief Executive Kate Nicholls said: “The eating and drinking out sector is one that has been characterised by high levels of growth, strong community and high street investment and record job creation since 2010, with employment up 18% and 1 in 7 jobs created.

“However, that has slowed markedly over the last year to 18 months, partly as a result of economic and currency pressure but largely due to increased regulatory costs, such as business rates, which are in danger of becoming unsustainable in the current trading environment.

The 2017 ALMR Christie & CO Benchmarking Report shows a drop in growth from 3.4% to 1.1% across the entire sector. At same time, wage costs have jumped by 12% and gross wage costs as a proportion of turnover now stand at 28%.

“Eighty-five percent of businesses have found ways to absorb some of these increased costs, 40% of which have fully absorbed them, resulting in a drop in operating margin, but the sector is approaching a tipping point. Many businesses do not have a cushion against any significant increases and the LPC must understand that large increases in wage rates will threaten future employment and investment.”

BBPA Chief Executive Brigid Simmonds said: “We are also facing significant new costs in other areas, such as the 4% rise in beer duty in the Budget, auto enrolment pensions, business rates, and the apprenticeship levy.  The LPC does need to weight all these factors carefully when setting rates.”

The BHA urged the Commission to be cautious in setting rates for the National Minimum Wage from April 2018. As there is only one compulsory rate for all regions and nations of the UK, particular attention must be paid to those parts of the country which are struggling economically.

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