UK | Interest rate cuts have provided much-needed encouragement to hospitality businesses in the UK, although industry leaders say more work is needed.
The Bank of England has cut interest rates by 0.25 percentage points, from five percent to 4.75 percent. It is the second cut by the bank this year. Industry leaders have said that the changes were encouraging for hospitality businesses.
“This interest rate cut is positive news in the short-term for hospitality businesses, particularly those still struggling with pandemic debt repayments, and consumer confidence,” said Kate Nicholls, Chief Executive of UKHospitality.
“However, the short-term benefit of this cut is significantly overshadowed by the looming GBP £3.4 billion worth of cost increases that will hit the sector in April.”
Nicholls added that the changes will impact the potential for future interest rate cuts as well, with forecasts already revised down following the budget. She said there was a need for the Government to take action to mitigate the increases, particularly the lowering of the employer NIC threshold.
She emphasised the impact this would have on the foodservice workforce.
“Lowering the threshold to £5,000 suddenly brings in thousands of part-time staff, and that disproportionately hits hospitality,” said Nicholls.
“Government action to reduce the devastating cost impact in April is essential.”
The news has come off the back of UKHospitality’s advocacy for businesses against a recent increase in full-time staffing costs of almost GBP £2,500.
The Institute for Fiscal Studies has said that businesses employing people on the National Living Wage will face the biggest hit from the increase, and as an employer of 3.5 million people, hospitality is set to be hardest hit.
“The increase to employer NICs and, crucially, the lowering of the threshold left hospitality owners with a sleepless night as they came to terms with the enormous cost they will have to bear from April onwards.”
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