Staffing Is Still the Core Issue

Many hospitality businesses cannot find the people they need. The issue is not just numbers. It is about skills, experience, and stability. Workers who left during the pandemic or after Brexit have not returned. Recruiting from overseas has become more difficult. Fewer young people are choosing hospitality as a long term career.

This is not just a recruitment problem. It is a retention problem. The sector needs to offer better conditions, more training, and a clear path for those who want to grow. Without change, the workforce challenge will remain a permanent obstacle.

Costs Continue to Climb

The price of food and drink has increased sharply. Energy bills are still higher than before. Transport and packaging are more expensive. Many businesses are locked into long term contracts that reflect the peak of the energy crisis. On top of that wages have gone up and employer costs have risen.

UKHospitality reports that the sector has faced more than three billion pounds in extra costs this year alone. This includes higher wage bills, increased national insurance and reduced support with business rates.

The Tax Burden Has Grown

Hospitality businesses pay more tax now than they did before. Employers are facing a higher national insurance bill due to recent changes. The threshold for contributions has been lowered, which brings more workers into scope. The minimum wage has increased again. Business rates relief has been cut back. VAT returned to its pre pandemic level and has stayed there.

Calls to reduce VAT for hospitality have been ignored. The cumulative effect is that many businesses are now paying more tax on lower or flat revenues.

What the Chancellor Said and Why It Matters

Earlier this month the Chancellor Rachel Reeves gave a major statement ahead of the upcoming Budget. Her message focused on cutting NHS waiting times, reducing public debt, and managing the cost of living. There was no mention of targeted support for hospitality.

There was no change to VAT. No pause or reversal of employer contributions. No new measures to help with business rates. While future business rate reforms have been suggested, they will not take effect until twenty twenty six. That means nothing changes now.

What this tells us is that the Government does not intend to provide direct support to hospitality in the short term. Businesses must plan on the basis that current costs will remain in place or even increase.

At the same time household budgets remain under pressure. If public spending is reduced and taxes rise in other areas, then discretionary spending on eating out and leisure will fall. That affects demand and puts further strain on already stretched operations.

The Food Service and Contract Catering Sector

Contract catering covers services in offices, hospitals, schools and other institutions. While it is often more stable than retail hospitality, it faces many of the same problems.

Costs have gone up across all inputs. Food, labour and utilities are more expensive. Many contracts in this sector are fixed in value which means there is limited room to recover those increases. Margins are thin. Some clients, such as schools or care providers, are under pressure themselves and cannot absorb cost changes.

Labour is also a challenge. Foodservice operators are struggling to recruit and retain staff for kitchens, service lines, and logistics. These roles are physically demanding and often involve unsociable hours. When employer costs rise, such as through changes to national insurance, it hits this sector hard.

The shift to hybrid working also means fewer people are on site in offices and other workplaces. That affects the volume of catering needed and makes forecasting more difficult.

While UKHospitality data shows that the Foodservice market has grown in value, much of that growth is from price rather than volume. This means businesses may be working harder to stand still.

The Chancellor’s recent statement does nothing to ease this pressure. The forthcoming Budget is not expected to reverse cost trends. If anything, more financial tightening is expected. The result is that contract caterers, like other hospitality businesses, must assume that this tougher environment will continue.

Customer Habits Are Changing

Consumers are more cautious. Many households are spending less. People are taking fewer trips, eating out less often and choosing lower cost options. They are still looking for good service, quality food and a pleasant environment, but they are more selective about when and where they spend.

This puts further pressure on businesses. You cannot lower quality and hope to survive. You must give customers good reasons to return. That takes effort, investment and consistency, which are all harder to deliver in a high cost environment.

What Businesses Can Do

There are no easy solutions. But there are actions that can help.

First, review your staff strategy. Make your jobs more attractive. Focus on retention as much as recruitment. Invest in training. Support people to grow.

Second, understand your costs in detail. Look at suppliers, stock management, portion sizes, waste and utilities. Small gains in efficiency can make a difference.

Third, get clear on your offer. Do your prices reflect the value you provide? Are you giving customers what they want today, not what they wanted five years ago? Can you find ways to build loyalty or encourage repeat visits?

Fourth, look at new income streams. This might include off site catering, hosting events, working with local partners or offering takeaway options. Diversifying your income can reduce risk.

Finally, speak up and speak out. Join with others in the sector to call for fairer tax treatment, sensible business rates and more support for training and development.

If the Government will not act without pressure, then the sector needs to apply that pressure with one voice.

Do Not Wait for Things to Return to Normal

Many businesses are still hoping that conditions will improve. That is not a strategy. It is a gamble. If you are planning for things to go back to how they were, you may be caught out. This is the new normal. Higher costs. Tighter margins. More demanding customers. Less reliable staffing.

The businesses that survive and grow will be the ones that face up to this now. That means honest thinking, hard choices and focused action.

Final Thought

The UK hospitality and contract catering sectors still matter. They employ millions. They support communities. They bring people together. But they cannot survive on goodwill alone. They need strong leadership, good planning and a realistic view of the future.

If you are in this space and want to talk, share, get advice or explore ideas, please get in touch. Uncommon Sense Ltd exists to help people like you make better decisions in difficult times.

You can email us directly at simon@finduncommonsense.com 

Simon Esner

Founder

Uncommon Sense Ltd