The cost of living crisis looming for Harrogate businesses and why jobs may be at risk

First announcement about this year's Harrogate Food and Drink Festival on the Stray

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As households face a tide of higher bills, fears are growing that smaller firms - who had initially felt buoyed by the end of lockdown - are now concerned that they face a rough ride in the year ahead.

The scale of the situation on a national basis is such that the Bank of England predicts that post-tax incomes will effectively fall 2% this year in the biggest fall in take-home pay since records began in 1990.

The combination of rising inflation, soaring energy prices and a 1.25% hike in National Insurance contributions from April will not only leave lower paid families struggling to make ends meet but also pile the pressure on operating costs for traders.

David Simister, chief executive of Harrogate District Chamber of Commerce, is warning the perfect storm of problems may be too much for some businesses to bear.

“We hear a lot of how the ‘cost of living crisis’ is going to affect households, but hear very little about the impact it’s going to have on business,” said Mr Simister.

“Although the Chancellor gave businesses a 12 month, 50% rates reduction last November, this April will see a big rise in basic costs, in particular utilities and National Insurance. For the hospitality industry so crucial to Harrogate, VAT will go from 12.5% to 20%.

“Businesses will be forced to pass these added costs onto consumers, jobs may be at risk.

“For some, the added tax burden and operating costs will be too much to bear.”

A sign of the pressures that even highly-successful businesses in Harrogate are facing was offered this week by the co-owner of one of the town’s most acclaimed

bar-restaurants.

Brett Lee, executive chef and a director of Stuzzi, said the surge of energy costs combined with the high cost of imports caused by a combination of Brexit and on-going effects of the pandemic could have a “dangerous effect on high street restaurants”.

“For restaurants the rise in energy costs is an extra blow on top of a difficult time for our industry,” he warned. “Every household in the country is feeling the pinch and it feels like another big obstacle on the road to recovery.

“We have had to adjust prices to swallow the rising cost and be extremely clever on how we now utilise our energy.

“Many restaurants have had to adjust their prices to a new level already due to a large increase in food and import costs caused by a combination of Brexit and on-going effects of the pandemic.”

Mr Lee said his business was already being creative in the face of mounting challenges and was determined to prosper.

But the forces standing in the way of doing business should not be under-estimated, he added.

“Every household in the country will now be reviewing how they are spending money due to the rise in energy costs,” he said. “This may push people to only visit their favourite restaurants once a month instead of a more frequent affair.

“It also means people have less disposable cash to spend in different sectors like the retail sector. Which doesn’t help our struggling high streets either and could also have a dangerous effect on restaurants and the lunch trade across the country, too.”

With a recent rise in interest rates to 0.5%, making mortgages and other debt more expensive, a 3.8% rise in rail fares coming next month and predictions that inflation will hit more than 7% by the spring, the Government attempted to act to ease the cost of living crisis last week.

But Chancellor Rishi Sunak’s package of measures - including council tax rebates and £200 loans to help families stay afloat when average energy bills soar by around £700 to nearly £2,000 a year - was condemned by charities and business leaders alike as ‘inadequate’.

As the British Chambers of Commerce warned this week of an impending “cost of doing business crisis”, The Labour Party called or VAT on energy bills to be scrapped to help people and businesses cope as energy prices soar.

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