Number Challenges to Catering Business

Challenges to catering businesses are this week’s news headlines for all the wrong reasons. The media have realised that the combination of the national insurance increases and business rates changes have created the perfect storm. The Chancellor’s announcements and exemptions have created further fuel for the media. This makes it appear worse than the physical effects of last week’s Storm Chandra on the West Country. Both storms require a practical response to go forward.

A Reeling Sector

Following Covid, inflation leapt in 2022 and 2023. This created the cost-of-living crisis and a reduction in demand in the catering sector. Food and drink business closures continued to increase.

Announced in the Autumn 2024 Budget, Employer Class 1 National Insurance increased from 13.8% to 15% from April 2025. By itself not devastating. That was the decrease in the threshold for payment from £9,100 pa to £5,000. This brought in significant numbers of part-time workers in lower paid sectors to Employer NI.

It was said that claiming the Employment Allowance increasing from £5,000 to £10,500 would mitigate this. While the numbers themselves look similar the effect is anything but, as most catering businesspeople could tell you.

Catering is a business based on planning. Every service for every hotel, pub, restaurant or mass caterer is planned to make it run smoothly and be flexible enough to cope with the demand. With the notice, a good number of catering businesses survived through 2025 by adapting or making fundamental change.

The Third Calamity

UK Hospitality estimates that the rateable value of catering properties will surge by over 50% from April 2026. This means that a caterer with a current business rates bill of £48K will need to find another £15K next year. In current profit terms an extra £40 per day, if open every single day of the year.

Simple maths equates this to a 2¾-hour shift for a 21-year-old on minimum wage. But most establishments can’t simply cut staff and maintain service. They already did that to survive the National Insurance challenge.

Currently restaurants employ 1.3M workers and pubs another 0.5M. But the number of closures is rising for pubs to one a day. The government was correct to respond earlier this week to mitigate the immediate effect on pubs and music venues with a support package of £80M pa for the next 3 years.

Short-term Support for Radical Change

That £240M of support however pales when compared to the £900M for just Heathrow. While the threat of increasing air fares to recoup, does not compare to the high street and social fabric loss of the local pub or restaurant across the whole country.

More positively, the support does buy time. Our sector must use that time to prepare and not lose sight of the fact that it will end in 2029. This will mean more radical adaption for whatever works in your area.

For some it will be opening more days perhaps for shorter time, but well-communicated to manage client expectations. For others, it will be the reverse of opening fewer days, when there is custom- no point in paying staff and food wastage for an empty room. It could be about creating more certainty with a weekly/monthly event to draw consistent clients and certainty of income.

For all, it will be about flexibility on ingredient availability. Perhaps working with more local suppliers able to predict more closely the shelf-life of crops, as both rely on profitable sales. It means then taking the dish off the menu mid-service to minimise waste. And countering this with customer preferences for local sourcing.

Focused Communication

Above all it’s about communicating effectively locally with your fellow caterers to the key audiences, like the Forest of Dean’s HOOP campaign

After all the only numbers that really matter are the satisfied repeat customers that enable us all to pay the bills and make a sensible profit. And plan effectively for next year.

Comments are closed.