Study finds hospitality SMEs hit hardest by inflation
A new study from UK-based card payment provider Dojo has found that hospitality businesses’ operating costs have been hit harder by inflation than any other sector over the past decade.
The analysis, which focused on small and medium-sized businesses (SMEs), also shows that on average, increases in UK business costs have outpaced consumer inflation by 11.75 percentage points – putting sustained pressure on margins.
Catering companies saw the highest increases to running costs, growing +62% over the past decade.
The study attributed this to both increases in transport costs, which rose +57% for these businesses, and the cost of supplies, which rose +113%.
Hotels have also seen significant operating cost inflation (+52%) along with pubs and bars (+48%), with the largest cost rises for each sector coming from payment processing costs (+83%) and technology and software (+167%) respectively.
The study noted that this can be explained due to an increase in the role digital technology has played in the hospitality industry, including integrated POS platforms and digital card machines.
Across the UK economy, technology and software costs for businesses have risen the most (+110%), followed by energy (+87%), insurance (+76%), licencing and mandatory fees (+65%) and industry-relevant materials and supplies (+64%).
Rent and business rates have also increased (+62%).
While these increases are steep, in terms of cost pressure for firms, labour has had the most significant impact on margins, rising +38% in the past 10 years.
Commenting on the report, Charlie Ashworth, head of research and insights at Dojo, said: “With increases of this scale, businesses must take a more strategic approach to operations and managing their supplies.
“Understanding the supply chain is critical, and business owners should really look into how much they pay per item and whether there are more competitive suppliers available without compromising quality.
“Another option is to investigate how usage can be reduced or processes improved to minimise waste. In times of sustained inflation, careful supply management can make a meaningful difference to overall profitability.
“The past decade shows that the cost of running a business has evolved. The next decade will reward those who evolve with it.”
The research looked at ten cost categories from 2015 to 2025, including business rates, energy and industry-relevant supplies.
This information was used to create their ‘UK Inflation Index’ a sector-by-sector breakdown of where operating costs have risen fastest.
The full report is available here.
Image Credit – tangerine chan on Unsplash
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