Rising Costs Are Strangling The UK Hospitality Industry

Navigating the past few years has been anything but easy for the hospitality and restaurant industry.

Many restaurants across the UK are looking at either reducing their outgoings or charging their customers more, but with the help of a smart staffing solution, they could find an alternate route through this tricky economic landscape.

It's Getting Tougher

This April, changes from the Autumn Budget will come into play, including a 1.2% rise in employer National Insurance contributions (NICs) and a lowered threshold of £5,000 per year.

These changes are set to hit the industry hard, with costs expected to reach a staggering £1 billion as an estimated 774,000 hospitality workers are pulled into the system, according to trade body UK Hospitality.

What's more, the new National Minimum Wage increase will drive costs even higher for employers. The industry body also warned that the cost of hiring a full­ time staff member would rise by at least £2,500 per year, pushing employment costs up by 10% per person - a heavy blow for operators already struggling to stay afloat.

And if that's not enough, the cost of doing business is rising, too. From energy and rent prices to food inflation and supply chain costs, hospitality businesses are certainly being squeezed, with many forced to turn to cost-saving measures such as slashing recruitment budgets.

Time For A Cost Review

In challenging times, tough decisions must be made, and it seems that Britain's restaurants are left with only a few options; increase prices, cut staffing budgets or accept a reduction in profits.

Of course, none of these options are welcomed or straightforward. Raising menu prices risks alienating customers, potentially for good, and could lead to reduced sales. Reducing profits, on the other hand, is simply unsustainable for most in the current climate. So, is reviewing staffing costs the answer?

The restaurant industry is notorious for high employee turnover rates; a recent report found that 42% of hospitality staff leave their job within the first 30 days.

This causes a huge headache for management, not only in terms of time and money spent on recruitment and training, but with quality of service. Staff shortages are also a challenge, increasing pressure further.

With this in mind, reducing the size of a restaurant team to save on costs is a risky strategy. A smaller team undoubtedly impacts service, which in turn affects customer satisfaction. Poor service can quickly lead to negative reviews. In fact, a recent consumer survey revealed that 39% of people are likely to write a negative review after going to a restaurant suffering from staffing issues, long wait times, and order inaccuracy. And it is these reviews that don't just hurt short-term profits - but can leave a lasting mark on a restaurant's reputation, making it harder to retain loyal customers and attract new ones.

Whilst reducing staff numbers may provide short-term savings, it can lead to overworked employees facing stress and exhaustion, driving even higher turnover rates. There is then the risk of losing experienced team members whose skills and knowledge are crucial for maintaining food quality, efficiency, and smooth operations.

A Recruitment  Shake-Up

Scalable staffing is crucial for the restaurant industry. Operators need the ability to adjust their workforce based on demand, and whether it's a spike in demand as summer kicks off or covering last-minute staff sickness, smooth operations and excellent service need to be maintained. Equally, during quieter periods, unnecessary staffing costs need to be avoided. Smart solutions in staffing provide this flexibility, without the need for full-time employees or contracts with agencies.

What's Next?

Navigating rising costs won't be easy and will require smart decision-making in the short term. However, in an industry as dynamic and innovative as the restaurant sector, key decision-makers must stay ahead of the curve to ensure long-term success.