Restaurants and hotels are struggling with a “shocking” inflation rate of up to 18%, the bosses warned, as the supply chain has been interrupted and Labor shortage Wreaking havoc in the hospitality industry.

Ian Wright, chairman of the Food and Drink Federation, told MPs on the Strategy Committee on Business, Energy and Industry that the retail price is bad.

“In the hospitality industry, a forerunner to retail, inflation is currently between 14% and 18%. It’s terrifying, ”he said.

“Inflation is a bigger scourge than almost anything because it discriminates against the poor.”

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What is inflation and why is it important?


Inflation is when prices go up. Deflation is the opposite – the price goes down over time – but inflation is far more common.

At 10% inflation, a pair of shoes worth £ 50 will cost £ 55 a year and £ 60.50 a year thereafter.

Inflation is eating up the value of wages and savings – if you make 10% of your savings, but inflation is 10%, the real interest rate on your pot is actually 0%.

A relatively new phenomenon, inflation has become a real concern of governments since the 1960s.

As a rule of thumb, times of high inflation are good for borrowers and bad for investors.

Mortgages are a good example of how beneficial borrowing can be – 10% annual inflation over seven years halves the real value of a mortgage.

On the other hand, retirees who depend on a steady income are seeing the value of their wealth erode.

The government’s preferred measure of inflation that the Bank of England takes into account when setting interest rates is the index of consumer prices (CPI).

The retail price index (RPI) is widely used in collective bargaining.

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Wright warned that the food and beverage sector expects the current challenges to persist for several years.

“Six months ago, almost all of our companies thought it was temporary. Now every company I know expects this to last through 2023 and 2024, every single one, ”he said.

During a hearing on the implications of the Supply chain crisis In terms of consumers and businesses, Wright recalled the high rates of inflation in the late 1970s when he saw a supermarket clerk change prices twice in an hour. “We really can’t go back to that. It took us 15 years to recover, ”said Wright.

Food and beverage manufacturers have been amid the amidst a combination of higher raw material prices, rising wages and increased transportation costs Truck driver shortageand rising energy costs.

Inflation hit the UK reached 3.2% in August, rose 2% in July, according to the consumer price index for inflation and figures from the Office for National Statistics (ONS).

Inflation is at its highest level in the UK since March 2012 and is expected to increase further, which will put further pressure on consumers ahead of the government’s tax hike.

Rising gas and electricity prices will also affect household bills and the Bank of England expects inflation to rise above 4% this winter, well above its 2% target, raising expectations that it will be forced to hike rates.

According to Stephen Phipson, CEO of the trade association Make UK, manufacturers are faced with price increases of between 30% and 40% for raw materials, which could become critical for certain companies if they cannot pass these costs on.

“As far as we can see, they don’t pass everything on and that can only last a few months, six months would be my best guess before we see real failures in terms of business,” Phipson said.

Phipson said that like many other industries, companies are suffering from the shortage of truck drivers.

The government’s recent moves to address labor shortages in the logistics sector, enabling overseas drivers to apply for temporary visas and a Relaxation in the number of deliveries UK licensed overseas trucks, also known as ‘cabotage’ – have not improved the situation, according to the Road Haulage Association (RHA).

questions and answers

What is “cabotage”?


Cabotage refers to the practice of domestic road freight transport carried out by trucks registered abroad.

Derived from the French verb caboter, which means to sail along the coast, cabotage originally took place in shipping when foreign traders collected cargoes and dropped them off in other countries.

Nowadays “cabotage” is mostly used in connection with the transport of goods by road. For example, if a Polish truck brings goods to the UK and unloads them there before picking up a new load in Newcastle that has been transported to London, the Newcastle-London trip would be a cabotage route.

According to figures from industry analyst Transport Intelligence, cabotage accounts for a tiny fraction of all goods movements in Europe, between 1% and 2% of total UK road freight traffic.

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“The reports have not relaxed at all,” said Duncan Buchanan, director of politics at the RHA. “A number of measures have been taken, training intensified, testing intensified, but visually on-site they have little effect.”

Companies in the logistics industry also have to pay higher wages to attract new employees or keep existing ones, with some companies reported increased labor costs of up to 20%.

“We’re seeing a lot of poaching from drivers, bigger companies with deeper pockets that are securing workers at higher rates,” Buchanan said.

Trade unions and industry associations have expressed their displeasure the government’s relaxation of cabotage rules, and the RHA expects the change to “suppress offered wage increases”.

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“We believe that the generally welcomed adjustment in wage levels to attract more drivers is likely to be suppressed by cabotage,” Buchanan said.

Britain has lost 53,000 truck drivers in the past four years, according to new numbers from the ONS, which show the number of people filling these roles has decreased by 16% from their peak in 2016-17.

Most of the losses – including a net decrease of 42,000 UK nationals and 12,000 EU citizens – were made during the pandemic.