Britain’s foodservice sector is among the most dynamic in Europe, but the industry’s top bosses will be forced to really earn their crust this year if costs pressures build in the way that many fear.
Life has been good for the volume high street chains, but the prospect of rising bills across the board has left the industry asking questions about its future. Bosses from some of the biggest chains are so concerned that they got together this week and penned an open letter to Prime Minister, Theresa May, expressing their anxiety about the enormous costs they face.
Leon CEO John Vincent, Yo! Sushi CEO Robin Rowland and Pizza Express CEO Richard Hodgson were among those who signed the letter, along with chiefs from a further 19 chains, including Carluccio’s, Wagamama and Wahaca. The hospitality industry pays millions of pounds in VAT, business rates, national insurance and other taxes but they think the government simply doesn’t understand the commercial pressure imposed on it.
The weak pound has led to food costs rising by about 5%, while universal increases in catering equipment prices due to currency volatility will make it more expensive to build kitchens next year. Those with central London sites have seen rents soar and are staring at increases of 30% to 40% in business rates. Leon’s John Vincent was quoted as saying that London’s restaurant chains are “being squeezed as never before”. Leon’s store in The Strand will see its rates go up by £24,000 next year, he revealed.
Experts argue that the industry is also penalised because restaurants and pubs have to charge 20% VAT. And while the rise in the National Living Wage to £7.50 this year, and towards £9 by 2020, is a good thing it does pose challenges for operators that spend 30% of their revenue on labour.
“We need balance elsewhere in the tax regime to do that,” the chain bosses argue in their letter. If the big guns see their profits eroded they are less likely to be able to reinvest. And that means fewer jobs, fewer kitchens and less wealth all round.
The future health of the entire foodservice supply chain hinges on how willing Theresa May is to open her door and listen.