Like their colleagues in many sectors, hospitality operators are looking into 2025 with pessimism following the impact of the UK Budget, which added to barrage of challenges hitting our industry over the last five years since Covid. The lockdown devastated our industry, and we have been very grateful for the support provided by the NI Executive and UK Government.
However, recovery has been very slow and amid all of the uncertainty and insecurity post-Covid, the massive surge inflation, particularly food and energy costs – which are huge in our sector – took hold. At one point, food inflation reached 19% and energy costs more than doubled. We have been dealing with this ever since and now the challenge of finding people and skills has led to greater wage pressures.
On top of this, our sector faces a number of continuous challenges including:
• Being a labour intensive industry and one that can’t and shouldn’t automate
• Operating on low profit margins
• We have hit a price ceiling and can’t increase prices
We want to work constructively with government to make sure the sector works. We already engage positively, for example, in developing skills and careers in line with the concept of good jobs and the Good Jobs Bill. We work closely with government around the tourism sector given our key role in its offering and development. However, many hospitality businesses will struggle to deal with the looming cost increases come April 2025.
It might have raised a cheer in Westminster when it was announced, but the cutting of duty on draught beer is unlikely to lessen the price of a pint while the cost of everything else that goes into that pint continues to rise. With operational costs now so high, the likelihood of this miniscule saving being passed on are slim.
Adding £2,500 per employee working a 38-hour week in ENIC charges is impossible for hospitality businesses to absorb. We are not the only sector to suffer from these increases, but our margins and labour-intensive industry are between a rock and a hard place. We will struggle to pass costs on to customers already stretched by the cost of living crisis, but we don’t have the profit margins to absorb this increase.
We all want to see people paid more. Our members want to reward good work and make work pay but what is being asked of businesses is simply unsustainable if taxes are going to shoot up at the same time. Without the extension of rates relief to Northern Ireland’s hospitality businesses or a decrease to VAT, these measures will only threaten employment and businesses in the sector.
It is not all doom and gloom of course; there is still a strong future in our sector as consumer demand remains high. CCGA consumer research shows a continued demand every month and our sector is all too aware of how important the maintenance of that demand is.
The challenge in that regard will be that consumers are currently low on disposable income. We have seen some improvements in this regard in 2024. As of October 2024, the average Northern Ireland family is left with £129 a week in disposable income, a £22 increase on the same time last year. The issue here is that increase still leaves the average consumer here with almost half the disposable income of their UK counterparts.
Northern Ireland is the weakest performing region of the UK in terms of disposable income, with the average for the UK as a whole standing at £250 a week, a £29 increase from October 2023.
It’s a virtuous circle; hospitality is reliant on its consumers, but the NI economy at large is reliant on hospitality. For every £100 spent in hospitality, £58 of it returns to the local economy and our suppliers. The more disposable income being earned in Northern Ireland, the better for everyone involved.
Nowhere is the key role of hospitality more pronounced than in our bustling tourism sector. The Department for the Economy has made the growth of tourism one of the most significant planks for economic growth, and the hospitality sector looks forward to playing its part in that growth. Given that hospitality accounts for two-thirds of the £1.2bn tourism spend in Northern Ireland, it is no exaggeration to say that without us, the tourism sector would be unrecognisable.
I believe there will be significant opportunities for our hospitality industry as the Department of Economy drives to substantially increase out tourism income. I know that the domestic consumer demand remains strong.
If the NI Assembly is to deliver the economic targets set out in the Programme for Government, then they need to recognise both our role as a delivery partner and out plight as an industry partner – because the NI Assembly need us, as much as we need them.
Colin Neill is chief executive of Hospitality Ulster