Leading trade bodies the ALMR, BBPA and BHA gave evidence this week to the Low Pay Commission, outlining investment by businesses in staff members and sector job creation, while highlighting increasing costs that threaten to undermine further investment.
The 2017 ALMR Christie & CO Benchmarking Report shows there has been a drop in growth from 3.4% to 1.1% across the entire sector. Wage costs have jumped by 12% and gross wage costs as a proportion of turnover stands at 28%.
Speaking on Wednesday, 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.
'Eighty-five percent of businesses have found ways to absorb 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.'
'Given current economic uncertainties and the big increases in costs the industry is facing this year, we do need a cautious approach,' added BBPA Chief Executive Brigid Simmonds. '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.
'We are also facing significant new costs in other areas, such as the four per cent 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.'
Finally, Ufi Ibrahim, chief executive of the British Hospitality Association, added: '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.
'Whilst the cost pressures on businesses have been well documented there are real risks to revenue from a weakening in corporate and consumer confidence. It is important that the industry’s growth – especially in employment – is maintained through a responsible NMW settlement.'