High inflation, energy prices continue to whack UK foodservice sector

The U.K.’s foodservice sector, and particularly its fish-and-chips restaurants, are continuing to battle high inflation and soaring energy costs.

Overall restaurant price inflation increased 10.4 percent in March 2023 compared to March 2022, according to the Office of National Statistics, and inflation at fish-and-chips eateries spiked 19 percent.

Overall U.K. foodservice price inflation hit 18.9 percent in March 2023, the first time the rate dipped below 20 percent since October 2022, according to the Foodservice Price Index published by CGA by NIQ and Prestige Purchasing.

“The continued fall in inflation will be some welcome relief for the hospitality sector,” Prestige Purchasing CEO Shaun Allen said. “However, prices remain high and with eight out of 10 categories still reporting month-on-month increases, the overall cost of food and beverages in the sector continues to rise, just at a slower rate. The pressure on operators' margins is still increasing and acting now to optimize their supply chain and limit the impact is critical.”

Independent hospitality operators, including chippies, are facing the “biggest challenge they have ever faced,” National Federation of Fish Friers President Andrew Crook told SeafoodSource.

“All of our ingredient costs have rocketed, wages have increased, and energy is much higher than what it was. This is all happening at a time when consumers have less disposable income,” he said.

Fish-and-chip shops have been hit with substantial price increases on ingredients, including for cooking oil and seafood. Their fish supplies were affected by U.K. sanctions on Russian seafood as part of the government's response to Russia's invasion of Ukraine in February 2022. In mid-March 2022, the U.K. placed a 35 percent tariff on Russian whitefish. Around 30 to 40 percent of filets used in fish and chip shops are of Russian origin, Crook told SeafoodSource, and “a lot” of Russian-caught fish is used in processing and for value-added products in the U.K. Making matters worse, restaurants are now experiencing the highest potato prices since 1976, Crook said.

“Things are tough. I have seen a shop close down this week in my local town,” Crook said. “We have been cushioning customers to the full impact of the increases we have seen, but as this situation continues, shops are using up their cash reserves.” 

Last year, Crook predicted that the U.K. could potentially lose one-third of its chippies. Even though the hospitality industry has been helped by “steady footfall,” Crook said, “the longer this situation carries on, the tougher the challenge of survival becomes.”

Lessening inflation rates are welcome, but the decreases are not enough to have any significant positive impact on foodservice businesses, according to UKHospitality Chief Executive Kate Nicholls.

“We are beginning to see a positive direction of travel with consistently declining foodservice price inflation, but the decreases we’re seeing are not significant enough to be felt by businesses yet,” Nicholls said in a press release. “It’s [still] enough to ruin businesses, especially alongside energy costs and workforce challenges.”

The government must address the “root causes” driving inflation, including forcing energy suppliers to renegotiate contracts signed during the height of the U.K. energy crisis, Nicholls said.

“Following any meaningful government support tailing off at the end of March, operators now face bills between three and four times higher than in 2021, locked into contracts that are destroying their otherwise viable and vibrant businesses,” the British Beer & Pub Association, UKHospitality, and the British Institute of Innkeeping said in a joint press release.

Further dampening restaurants overall outlook is the Bank of England’s recent interest rate increase of 0.25 percentage points to 4.5 percent …

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