Hospitality: BoE interest rates hike could ‘significantly impact businesses’
The hospitality sector has expressed concerns that the Bank of England’s decision to raise interest rates could “significantly impact business viability,” as the interest rates on loans many pubs and restaurants took out to survive the pandemic are now set to rise.
“Hospitality was the business sector most affected by the pandemic, with a large number of businesses forced to take out loans to survive,” Kate Nicholls, chief executive of UKHospitality said in reaction to the news.
“With those loans now due, consistently rising interest rates compound debt and inflict further economic pain on venues,” she added.
The Monetary Policy Committee (MPC) voted seven to two in favour of raising borrowing costs 25 basis points to 4.5 per cent on Thursday, sparking fears amongst many hospitality businesses who have been bearing the brunt of soaring inflation and rising energy costs since last year.
“Pubs and brewers don’t want to put up prices for customers, because with interest rates continually rising customers are watching the pennies – but they are left with little choice,” Emma McClarkin, chief executive of the British Beer and Pub Association said.
They need to cover their own costs and inflation is hitting them throughout their supply chains, it’s an unsustainable situation that is completely wiping out profits.
She added: “Not only will pubs be suffering from reduced spend but increased rates make investments in their businesses and the opportunity to grow much harder. Add to this a drop off in the support on sky-high energy bills and you’ve got a toxic mix that is making it incredibly difficult for pubs to survive.”
The sector has also seen the end of many government support schemes such as the Energy Bill Relief Scheme, which provided £18bn to businesses to help with soaring costs.
However, this support package was replaced with the Energy Bills Discount Scheme which provides £5.5bn.
It comes as the chief of the boss of JD Wetherspoon, Tim Martin, blasted MPs over a “lack of understanding” in regards to inflation.
While Martin’s budget chain recorded a strong performance he also said that a lack of understanding surrounding inflation from senior politicians presents a “real threat to the future prosperity of the country.”
Martin said: “In order to bear down on inflation, political parties should encourage free enterprise, rather than a reliance on additional regulations.”
“Inflation, especially in labour, energy and food costs, remains an intractable issue,” he added.