Today's business and finance round up 26th November 2021
🍻Cost pressure threatens hospitality recovery
26th November 2021
Good morning In one of the more surprising collaborations of the year, today Asda will be hosting a Gucci treasure hunt in stores with prices starting at just £12. The move is part of the promotion for the House of Gucci film, starring Lady Gaga. 30 exclusive Gucci pieces will be scattered in hiding places across 50 different George at Asda shop floors — in London, Bristol, Birmingham, Edinburgh and Brighton. Happy hunting!
- Cost pressure threatens hospitality recovery
- Housing (un)affordability reaches record high
Cost pressure threatens hospitality recovery
What’s going on?
Yesterday hospitality group Mitchells & Butlers posted a second straight year of losses and warned that rising costs pose a challenge for the whole sector.
The owner of pub and restaurant chains including All Bar One, Harvester and Toby Carvery, reported revenue of £1.1bn for the 12 months to September, 10% down on the year before.
Why is this important?
Since the high street reopened after lockdown the leisure industry has been fighting to recover to pre-Covid levels.
Mitchells employs 44,000 people across 1,700 sites and cut 1,300 jobs in 2020 due to reduced trade.
Although the group made a loss of £42m in the past year, this was better than the £123m loss it posted the year before.
Encouragingly weekly sales since August are now 3% higher than the same period in 2019 with suburban areas performing better than city centres as workers stay closer to home.
But challenges remain on the horizon. Like many companies it’s facing rising energy, food and staff costs as supply chain issues plague the economy.
Mitchells says that to protect profits it will pass on the higher costs to consumers. However the price increases would not be 'eye-watering' as the company would look for savings elsewhere.
Narrowing losses and recent sales trends shows that Mitchells is on the road to recovery. However rising inflation could be a stumbling block if price increases turn customers away.
The Christmas office party season is a crucial period for the company but it expects that companies will opt for smaller and more suburban events as Covid concerns remain.
Housing (un)affordability reaches record high
If you’re looking to get on the property ladder, then you may want to look away now.
Buying a home has become even more out of reach to first time buyers, that’s according to the latest data from the Nationwide Building Society.
In the third quarter of this year, the ratio of first-time buyer house price to earnings was 5.5, above the previous record of 5.4 in 2007, and well above the long run average of 3.8.
Londoners face the toughest challenge with buyers needed 9 times their salary to get on the property ladder. Scotland has the best affordability with homes worth an average of 3.4 times earnings.
House prices rose quicker than wages over the last year. This was driven by record low interest rates which made mortgages more accessible and the stamp duty holiday that propped up the property market during the pandemic.
Nationwide also found that a 20% deposit is now equivalent to 110% of average income – another record and up from 102% one year ago.
So is there any good news for first time buyers? The Bank of England is expected to increase interest rates to combat rising consumer prices soon.
This would increase the cost of mortgages which could apply the brakes to rising house prices.
Stat of the day
Migration from the EU to the UK went into reverse for the first time since 1991 last year as a net 94,000 EU nationals left the country during the pandemic
Other stories to keep you in the loop
- Tube strike to go ahead over drivers’ hours
- Government to expand development finance investment to boost growth
- Two more energy firms power down as taxpayer keeps lights on at Bulb
- Amazon workers plan Black Friday strikes
- Snapchat owner to more than double London HQ size in new office deal
- Huel weighs London IPO as appetite for plant-based meal replacements grows
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