Market analyst Peter Backman responds to Emergency Budget

24th June 2010, 12:27pm

Peter Backman, managing director of foodservice consultancy Horizons, has commented on how this week's Budget is likely to have an impact on the foodservice sector.

"The measures taken by the Government in this week's budget means that consumers are likely to have less money in their pockets to spend on eating out and are going to be more cautious about how they spend money they have got. 

"The VAT rise, fall in transfer payments such as housing benefit and child allowances and continued uncertainty in the jobs market all mean that spending will be on hold for longer, so while we may have expected the market to improve towards the latter end of this year, it is unlikely to do so for a further 12-18 months.

"For operators, margins will continue to be squeezed as inflation falls and, if they don't pass on the VAT rise in full, their profits will suffer. The reduction in capital allowances will also have a negative impact on profitability.

"The steep reduction in public spending, down by 25% up to 2015, will mean that there could be more contracts up for grabs in the contract catering sector, although margins will remain extremely tight. However, less investment in schools, hospitals and government facilities mean fewer opportunities for contractors and could mean existing contracts come up for renegotiation more quickly."

Related Articles:

• 22 Jun 2010 - Emergency Budget – Pub industry applauds decision to freeze beer tax

Click here to submit a comment!

Have your say!

To comment on this article, simply enter your name and email and send us your views. Please note that your comment will appear publicly below this article once it has been processed. For enquiries please email info@eatoutmagazine.co.uk.