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'A Hurricane, with the Perfect Storm of Issues:' The Welsh Hospitality Sector is Desperate

The hospitality sector in Wales, particularly in Cardiff, is experiencing a severe crisis, with a spate of closures of beloved pubs, restaurants, and cafés.

This alarming trend, emerging just weeks after the festive Christmas period, is a culmination of issues that have been simmering for years. The combined impact of COVID-19, Brexit, and soaring operational costs has pushed many establishments to the edge, with several already succumbing to these pressures.

Cardiff, Wales' capital city, has become the focal point of these challenges and the sector is undeniably facing serious problems.

Owen Morgan, founder and director of Forty Four Group, which includes Bar 44 and Asador 44, describes the industry as having reached a breaking point.

He likens the current situation to a hurricane, with the perfect storm of issues now larger and more destructive than before.

Brexit has had a particularly pronounced effect. The departure from the EU has led to significant staff shortages, as many experienced, career-driven staff from Europe no longer feel welcome in the UK.

This has made it challenging to find replacements who are equally committed to the hospitality industry as a career. Additionally, the cost of both imported and UK-grown produce has increased.

Reuters reports that Brexit is responsible for one-third of the increase in household food bills since 2019, a burden that is acutely felt in the restaurant sector. The knock-on effect on suppliers, haulage, and container shipping companies has led to shortages of produce, further straining the industry.

The lingering effects of COVID-19 are also still being felt, with many businesses grappling with loan repayments and heavy investigations into grant usage. Changes in consumer habits post-pandemic have seen a shift towards home cooking and less frequent dining out, impacting restaurant revenues.

Energy costs have skyrocketed, with some businesses like those owned by acclaimed baker Alex Gooch seeing a fivefold increase. This has forced many establishments to either drastically change their offerings or shut down completely. The energy crisis is particularly harsh on smaller operators, with some joining legal actions against energy giants over high-cost deals.

In addition to these challenges, the hospitality sector is dealing with increased alcohol duty and National Insurance contributions, as well as a nearly 10% increase in the living wage. These rising costs are squeezing profit margins to unsustainable levels.

Unique to Wales is the issue of business rates relief. The Welsh Government has reduced the relief from 75% to 40%, while in England, it remains at 70%. This disparity adds to the financial strain on Welsh businesses. VAT is another concern, with industry voices like James Chant of Matsudai Ramen calling for a reduction from the current 20% to help save thousands of businesses across the UK.

The situation in Cardiff reflects a broader trend affecting the UK hospitality industry, but the specific challenges faced in Wales, such as the reduction in business rates relief and the high VAT, exacerbate the difficulties for Welsh businesses. The need for supportive measures and a re-evaluation of the tax structure is critical to safeguard the future of the hospitality sector in Wales.


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