UKHospitality: A mixed bag

The chancellor’s spending review may have proved thin gruel indeed for the wider hospitality sector, but there were parts of it that will have provided some succour for contract caterers.

UKHospitality, in our spending review submission to government, proposed an overhaul of the school meals system. This included increasing the per-meal funding allowance to around £3.50, ring-fencing school meals funding so it’s only to be spent on school meals – with any surplus returned to the government – and the expansion of free school meals (FSM) eligibility to children whose parents receive Universal Credit. This, we urged, should be accompanied by a wider review of all types of public sector catering funding to ensure that it’s set at the correct level, and for that reason we called on government to increase funding for contract caterers.

Government funding for provision of the likes of FSM has fallen considerably over the past decade, while contract caterers’ key costs – food and labour – have risen. While it was disappointing not to see that funding in the spending review, it did announce investment of £410m per year by 2028 to 2029 to expand FSM in England to all pupils with a parent receiving Universal Credit. With contract caterers being largely responsible for providing that essential FSM service, we hope that some of the £410m goes towards fairer funding for contract catering businesses.

Leading contract caterers sales grew year-on-year by 9.5% between January and March this year, according to the latest Contract Catering Tracker, from CGA by NIQ, Bidfood and UKHospitality, meaning their sales have risen in every quarter since mid-2021. The results build on growth of between 7% and 12% in each of the four quarters of 2024.

Clearly, then, contract catering is a sector that should be backed, so that it can continue along its impressive growth path, and at the same time ensure that it can still provide meals for schools, hospitals and prisons. Indeed, the spending review included the fact that the government will increase annual NHS day-to-day spending by £29bn in real terms from 2023/24 to 2028/29, taking spending to £226bn by 2028/29; and that £7bn will be allocated from 2024/25 to 2029/30 to build 14,000 new prison places.

As for the spending review’s ramifications for the wider sector, there were some parts of it that might help hospitality businesses in thriving UK high streets lead the government’s mission to renew Britain. The potential for improvements to regional transport to benefit venues, consumers and hospitality workers was one example.

However, the big obstacle in hospitality’s road ahead remains the huge tax burden imposed upon our sector, so as we look beyond the spending review to the next budget, we must make it a priority to cut the cost of doing business. Critical to this will be to revisit the ill-thought-through changes to Employer National Insurance Contributions, to incentive more job creation, particularly those offering much-needed flexibility.

By the time you read this, though, the government is scheduled to have published its industrial strategy. We firmly believe that it simply must acknowledge hospitality’s ability to deliver economic growth, jobs and regeneration in towns and cities across the UK.

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