… and that’s going to mean LESS MONEY coming in. It’s a scary time, just when we’ve had almost exactly two years of scary times for this industry.

Hussein Ahmad, our resident hospitality finance expert from brilliant Viewpoint Accountants, talks us through what to expect.

Significant changes are coming into effect at the end of March, which will mean the profitability of your restaurant or bar will be negatively affected (if adjustments are not planned for and taken.)

The VAT reduction to 5% between July 2020 and Sept 2021 was a lifeline in clawing back some lost profits in the height of the pandemic, the 12.5% rate since September has still made a huge difference. In order to maintain the same level of profitability from April, restaurants will need to decide whether to a) pass on the shortfall in profit onto the customer by raising prices or b) reduce costs, through changing suppliers, ingredients, cuts etc. The same principle applies to factoring in the extra costs of paying greater business rates.

The increase in National Insurance is particularly challenging in a staffing crisis for hospitality, where there is a lack of supply of staff employees.

Different restaurants are reacting in different ways. Thomas Tjong of Ekachai told Bloomberg recently that he has raised prices by 8% and will consider further increases. At the other end of the spectrum, McDonalds has reduced wage costs by replacing cashiers with screens. There are new apps being launched, such as payment app Sunday, that claims to reduce service time by 15 minutes and allow restaurants to turn tables quicker.

Whichever the methods pursued, smart business leaders will have worked out what effect the above changes will have on their profit margins and made plans to correct them where possible, so they are not panicking at the close of March.