Profit Margins Getting The Squeeze In Hospitality Sector

It is certainly good news that the inflation rate was down to 2% last month (it was 2.3% in April), however this does not mean that everything in the garden is rosy as prices are still rising, just not quite as quickly as before.

And there are other cost pressures that are weighing heavily on many small businesses in the hospitality sector. Wages, food and drink costs and utilities have all increased and this has really squeezed the profit margins at many outlets. And after all profit is the name of the game for all businesses, as if there is no profit there will no longer be any business.

Businesses Are Not Making An Operational Profit

Here is what Eamon McCusker, who owns Chubby Cherub and AM:PM restaurants in Belfast, says about the difficult trading conditions they find themselves in, copied from an article on the BBC News website. He says:

“There is massive demand and places are doing well on traffic and numbers but they are not making any operational profit. Without profit, you can’t survive.”

“In 2023 we saw a trebling in our electricity bill in one of our venues for one quarter it went up from £7,000 to £21,000. Now it’s levelled out at £14,000 which is still double.”

The hospitality sector in Northern Ireland has a right to feel somewhat short-changed, as hospitality businesses in England get a 75% on business rate bills, businesses in Wales get a 40% discount, whereas businesses here do not get the same rate relief.

Variety Of Reliefs Available To Support Businesses

The Northern Ireland Executive have received some extra funding to help in this regard, the Barnett consequential as it is known, but the Executive decide how this funding is spread out. Here is what a spokesperson for the Department of Finance said in the same BBC article in defence of this perceived lack of support. They said:

“There are a variety of reliefs available to support our business ratepayers including Small Business Rate Relief (SBRR), Industrial Derating and Non-Domestic Vacant Rating.

“Almost 57% of all pubs get some form of rate support and 65% of the hospitality sector as a whole is in receipt of support via the SBRR.

“The department extended the SBRR scheme for 2024/25, providing a forecasted £21.5M of assistance to almost 30,000 small businesses who will benefit from a reduction of between 20% to 50% on their rates.”

But Mr McCusker, again in the same article, countered this by saying:

“What’s actually happening within the industry is you’re losing the diversity, you’re going to lose the actual heartbeat and the soul of the industry and you will have a high street and communities with the large multinationals but you will lose the people like us – the independents.

“You can’t expand or plan for the future and that’s when you have people making that horrible decision to close because it isn’t working.

“Instead of growth, you have to just say we just need to still be here by next year,” 

The hospitality sector is crucial to the economy in Northern Ireland and they should be given all the support they need to ensure they survive and then go on to thrive.