The last couple of years has felt like one crisis followed by another. There is little sign of any easy respite ahead and it does appear that all face a new walk through yet a more challenging landscape. The economy is going to test all even more than it has to date.
- Inflation has already hit a 40-year-high of 9% and it is forecast to continue to rise to above 10% later in the year. Inflation expected to average 8.8% this year and fall to 7.4% in 2023.
- The UK economy is forecast to grow by 3.6% in 2022 but fall to zero growth in 2023. It was only six months ago that the forecast had been for 4.7% growth in 2022 and 2.1% in 2023.
- Consumers are feeling bemused and battered with increased interest rates, higher taxes, rising energy and fuel costs and overall inflation
- UK was expected to be the second fastest-growing economy in the G7 in 2022 and fall to the slowest in 2023.
What it does mean is that, for many, the worst is still yet to come and it is going to place huge pressures on the Government. Without being political, how it manages the next 18 months could well determine its own future regardless of what has taken place to date. People are forgiving of mistakes as long as it does not impact on their standard of living.
The pressures will have naturally been partly hidden by the WFH hybrid models which has created some savings but this will change.
For hospitality, the above should be of real concern as it impacts most on both the consumer and also business models. There has been much debate over what level of price increases will the consumer accept. The view was always viewed to be 10% but many operating models are seeing 20-25% cost increases and their models have little space to lose the extra cost. At the same time, it is clear that there is a lag of people returning to city centres and workplaces. Sooner or later, this will see real changes in models. Many have stayed loyal to their traditional models to date but this will inevitably change.
There are many who argue that the industry is being protected by savings built up during the pandemic but how long will these last or when will the consumer change their behaviours?
Forecasts do seem to suggest that we will see the storms begin to pass in around twelve months time but no one forecast of the Ukraine- Russian conflict and forecasts change almost monthly. No one can say for sure what is to be faced bar more change is inevitable.