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Menu prices could rise by as much as 20%

Restaurants risk being forced to consider increasing menu prices by 20% to cover the challenges they will have to manage over the next six months, concludes Howard Field.

Field said: ”If a restaurant with a 12.5% service charge wanted to raise its net revenues after VAT by 10%, its menu prices would have to rise by at least 17%. This assumes that all of the service charge is paid out to staff, and that VAT returns to 20%. If a 10% net revenue increase is not enough to cover higher NI, wages, utilities and other costs, then menu prices might need to increase by 20% or more.

The sector is facing cost increases across the board, including staffing, utilities and raw materials.

It is clear that the industry must hope for a positive response to calls for Chancellor Rishi Sunak to maintain VAT at its current level at the Spending Review next week.

The big question is going to be whether the market would accept these major price changes - and if not, whether and how these businesses will be able to adapt and survive.”


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