Inflation: Hospitality sector struggling with cost pressures

Pressure on small business owners shows no sign of easing despite inflation falling to its target rate in May.

The Office for National Statistics has said the rate at which prices are rising – known as inflation – hit 2% in May, down from 2.3% in April which was the lowest rate since summer 2021.

Inflation has fallen significantly since it hit 11.1% in October 2022, which was the highest rate for 40 years.

However, that doesn’t mean prices are falling – just that they are rising less quickly.

For Eamon McCusker, who owns Chubby Cherub and AM:PM restaurants in Belfast, the cost pressures are the toughest he has faced in 22 years.

He said increases in wages, food and beverage costs and utilities have had a huge impact on the industry’s profitability.

This, he added, has led many restaurants to decide to close, as despite being busy, they are not making enough money to survive.

“There is massive demand and places are doing well on traffic and numbers but they are not making any operational profit. Without profit, you can’t survive.”

“In 2023 we saw a trebling in our electricity bill in one of our venues for one quarter it went up from £7,000 to £21,000. Now it’s levelled out at £14,000 which is still double.”

It comes after a number of high profile restaurant closures across Northern Ireland in recent weeks and months.

Unlike in other parts of the UK, hospitality businesses in Northern Ireland are not benefitting from a 75% discount on business rates bills that is in place in England and a 40% discount in Wales.

The Northern Ireland Executive received additional funding from the UK government – what’s known as a Barnett consequential – as part of that decision, but it was up to the executive to decide how that money was spent.

A spokesperson for the Department of Finance said: “There are a variety of reliefs available to support our business ratepayers including Small Business Rate Relief (SBRR), Industrial Derating and Non-Domestic Vacant Rating.

“Almost 57% of all pubs get some form of rate support and 65% of the hospitality sector as a whole is in receipt of support via the SBRR.

“The department extended the SBRR scheme for 2024/25, providing a forecasted £21.5M of assistance to almost 30,000 small businesses who will benefit from a reduction of between 20% to 50% on their rates.”

Mr McCusker said the sector in Northern Ireland needs support.

“What’s actually happening within the industry is you’re losing the diversity, you’re going to lose the actual heartbeat and the soul of the industry and you will have a high street and communities with the large multinationals but you will lose the people like us – the independents.

“You can’t expand or plan for the future and that’s when you have people making that horrible decision to close because it isn’t working.

“Instead of growth, you have to just say we just need to still be here by next year,” he added.