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(Bloomberg) — Restaurants and bars across Britain are having to slash staff working hours to cushion the blow of a £3.4 billion ($4.3 billion) spike in annual costs, according to the head of the sector’s trade body.

Kate Nicholls, chief executive officer of UKHospitality, said sites were also cutting back their opening hours to deal with a “tsunami of costs.” 

From today, increases to minimum wages in the UK will raise the sector’s wage bill by £3.2 billion, while higher business rates will add an extra £224 million, the group said.

“It’s that perfect storm,” Nicholls said in an interview. “You’ve got an awful lot of costs already hitting the business — energy, food waste, food inflation — and then you’ve got wage cap costs on top and tax increases in the form of business rates.” 

The new National Living Wage will lift the hourly rate for adults by almost 10% to £11.44 an hour. As a sector that relies heavily on its workforce, employment costs make up over half of operating costs, UKHospitality said. 

The Bank of England is closely watching to see whether higher wages will stoke inflationary pressures, potentially delaying interest rate cuts. 

Reforming business rates, temporarily reducing the rate of employer National Insurance Contributions and cutting VAT are some of the levers that governments can pull to help businesses absorb recent price increases, Nicholls said.

UKHospitality said higher costs have hit confidence and investment, with openings of licensed premises at their lowest level in three years. Eating and drinking out have become less popular, Nicholls said, with people citing the cost of living as reasons for staying in. 

The money businesses want to invest in growth, she added, will instead “have to be spent keeping their doors open.”

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Published: 01 Apr 2024, 05:32 AM IST

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