Hospitality recovery dampened by Omicron as December takes £3bn hit

The hospitality sector has suffered “devastating” sales falls in the last week of the year, according to the latest pub, bar and restaurant market figures from UKH and CGA. 

The wider hospitality sector witnessed a 40% drop in sales for the month versus the same period in 2019, as depleted sales represented a £3bn hit to the industry against 2019.

UKH said that what would traditionally be a bumper sales period for thousands of hospitality businesses is now “likely to be remembered as a lost chance to rebuild crucial cash reserves in the sector – delaying the recovery and leaving many businesses exposed going into the fallow winter months”. 

It comes as sales were 60% down on Christmas Day, while Boxing Day sales fell by a third (31%). Takings on New Year’s Eve, one of the biggest individual trading days in the industry, were down by 27%.  

Venues in Scotland and Wales were hit “even worse” in the week leading up to New Year, amid stricter restrictions. In the week ending 1 January 2022, hospitality in Wales performed twice as badly as England, and in Scotland 2.5 times worse.

The overall findings are said to demonstrate how the industry’s fight to recover from the pandemic has been “severely hampered” by Omicron, as weeks prior to the new variant, sales had been recovering steadily and were close to pre-pandemic levels (98%).

UKHospitality CEO Kate Nicholls, said: “December is a vital period for hospitality businesses, equal to three months’ worth of trading for many. These new figures are crippling for an industry already struggling but also spell disaster for the wider UK economic recovery, as ONS figures showed that overall growth in Q3 was driven by hospitality.

“These sales drops versus 2019, and also against our members’ projections before the onset of the new Omicron variant, will have taken most businesses from healthy trading for the month to painful losses, delaying the sector’s recovery and extending hospitality’s long covid. Cash reserves are severely depleted, and some businesses will struggle to survive the first quarter of 2022.”

She added: “This dreadfully disappointing December has further stymied our ability to deliver jobs, growth and investment at pace, which we all know is so crucial to the recovery of our economy overall.”

UKH also warned that hospitality is facing “significant” headwinds in 2022, “compounding a challenging outlook for thousands of businesses and millions of workers”. It added that businesses now face a “cliff edge” in April when VAT is set to return to 20%, plus a rise in business rates and labour costs, as well as soaring energy costs, the growing cost of food and drink and an end to the rent moratorium.

Nicholls added: “A pivotal moment for the recovery is approaching. As recent quarterly GDP figures show, the hospitality sector can play a leading role in driving the recovery.  

“Crucial to this is the right support and keeping VAT at 12.5% will enable the sector to safeguard jobs and crucially, it will help keep down costs for our guests amid some very strong inflationary pressures.  Reducing rates bills in 2022/23 will also be important in enabling businesses to recover again.”