The English Michelin starred chef, Chef Thomas Kerridge is the expert when it comes to restaurants in the hospitality industry in the UK. And for 2022 and the upcoming period, he is concerned for the industry. While Speaking to BBC Radio 5 Live’s Nihal Arthanayake, he had warned that restaurants, ( his and majorly others in the hospitality sector) will be closed until next spring.
He put forth several opinions citing many restaurants in the industry are considering mothballing. To understand what chef means, first understand how mothballing works.
Mothballing is a business term, which means to restrain, store or preserve the product inventory and resources for their later use or sale. This phenomenon means that ongoing production and facilitation of goods and services would come to a halt.
Mothballing helps manufacturers with some flexibility when it comes to production, leading to a reduction in high operating costs. These benefits manufacturers by swiftly restarting production of goods based on temporary spikes in demand instead of managing them year-round, bearing the extra cost without the recovering costs.
This can be seen in the hospitality industry in the UK. As Tom Kerridge informed during the discussion that he is considering mothball, during winter and reopening in spring. He said he has a contract with an energy supplier which would end in December and he would now have to avail of electricity as per market rates. This is said to cause him a rise of £30,000 a month for the electricity bill, which initially was £5,000 and will then in December be £35,000
“The numbers are so ridiculous no wonder so many businesses are closing, talking of closing. There are lots of hotels talking [about] just mothballing it for the winter because they can’t afford to keep the heating going.
He explained further, “They’re not busy enough to close it down, they’ll shut it all down and reopen in spring, and these are decisions and conversations many people within hospitality businesses are having and I’m sure so many other businesses.”
Taking this into account, his annual electricity would skyrocket from £60,000 to a whopping £420,000. This would lead to an extreme rise in prices charged by restaurant owners to customers to meet the cost.
A month before this interview, Chef Kerridge talked to the Morning Advisor raising concerns for the hospitality sector. He added: “If [consumers] taking the family out for a sneaky pizza on a Tuesday night, and it’s normally £100, if the price suddenly went to the same as [businesses are] getting quoted for their energy, your pizza family night out is now £600 or £700, it’s just not viable. “If you’re buying a £5 pint of beer, but then come December it’s £35, how often are you going to go out?”
This is not the first instance when the hospitality industry in the United Kingdom was given a warning regarding collapse.
In July, chef Damian Wawrzyniak, the chef for House of Feasts, shared his concerns that his restaurant would be closed next month as he considers mothballing too. He said“The price of cheese has doubled. Oil is [through] the roof. My energy bill is up by 300% and is now nearly the same as the rent,” Wawrzyniak said. “Electricity, gas, BT … Everything is going up, even insurance“.
According to Damian, the number of people visiting his restaurant has decreased by 40%, while the cost of his inventory has increased by 40% and to make matters worse, he cannot raise the price of his food, because then people would refrain from spending their money on too expensive food when their cost of survival is increasing.
These are not isolated incidents. Mothballing and a wave of closure in the hospitality industry of the United Kingdom could be expected as a direct result of soaring inflation which peaked at its 40-year high of 9.4%. Inflation has led to an extreme rise in cost and businesses across the country cannot transfer this cost onto customers, who are also struggling with inflation.
In coming months, mothballing is expected to increase, even from well-established names from Mark Hix to D&D London. Hix, who had to shut down his Fox Inn in Dorset on Sunday, penned the following on the restaurant’s website: “I don’t need to tell anyone how hard it has been for everyone in the industry since Covid hit, and the challenges simply continue with rising costs and a difficulty to recruit as I have never known in my whole career.”
Des Gunewardena, the chief executive of D&D, had to close Aster restaurant in London, and said that this move was “a sign of the tough times we are in”.He added: “In the past, we would have taken a longer-term view. But given the current acute challenges of inflation and, more importantly, staffing, we felt that we could not justify keeping Aster when other more successful restaurants in the group were crying out for good people.”
Gavin Cox, the chief executive of enterprise Famously Proper, which owns the Byron burger chain and the Mother Clucker takeaway specialist, said that many small businesses had made an offer to him to purchase their restaurant as the operation was proving to be tough. Cox added: “There is cost inflation across the board. Cooking oil prices have doubled year on year, electricity has doubled and the price of proteins is up 40%. The underlying inflation rate of 10% doesn’t show how much businesses are trying to absorb.”