Fears for future of Leeds hospitality businesses facing a 'perfect storm' of VAT and cost increases

One Leeds-based food business has said the increase in fuel and transport costs has led to some goods doubling in price, and has called for the Government to step in and help ease the squeeze on the hospitality industry.

It follows recent claims from the fish and chip industry that the rise in prices of cooking oils and fish could lead to many eateries closing down within the next few years.

One business owner called the problem a "perfect storm", adding that recent increases in business rates and VAT have pummelled many cafes and restaurants around the city.

"We are seeing increases with oils, because we change our oil quite regularly and a lot of our stuff is fried," said Ahmed Gouda, who co-owns Leeds-based Falafel Guys. "Veg as well has gone up like crazy - cucumbers and tomatoes in particular.

"A box used to be £6, and for a couple of weeks they were up to £14.

"We are in constant communication with our suppliers and they say it is mainly down to the rise in fuel costs. For vegetables being imported from France or Spain, it is costing a lot more to bring them in and transport once they're here."

While his own business is making ends meet, Ahmed said many have seen their bottom line "noticeably decrease".

Popular street food cafe Manjit's Kitchen tweeted this month: "The increase in gas and electricity bills and the price of veg oil likely means we won’t be here for that long, so if you do wanna come, come."

Lou Henry owns Opposite Cafe, which has branches in Chapel Allerton and near the University, and described the situation as a "perfect storm" of cost pressures on the hospitality industry.

"There are so many different factors that make it difficult," she said. "April was a horrendous month because we had the VAT going up to 20 per cent again, then we had the wage increases going up, and then business rates came back in for hospitality businesses in April.

"On top of that we have staffing shortages, so a lot of businesses are having to pay over living wage to recruit people."

She added that as well as the prices of oils and vegetables, milk has seen huge cost increases due to the rising costs of fuel and animal feed.

"We always used organic milk and we always pay a bit more for it," said Lou. "Pre pandemic it was about £1.60. We have had three price rises just this year and it is now at £2.31. It's absolutely horrendous.

"It's like a perfect storm - there are loads of different factors affecting everybody. We are already working with incredibly small margins."

She added smaller cafes and restaurants could struggle to keep afloat, as the constantly changing prices mean they will inevitably lose money on their menu items.

The future of the industry is also something that also worries Ahmed.

"We have seen it already with some of our friends in the industry," he added. "Several of them have had to, through no choice of their own, increase their prices. The sad thing is we know people who have had to close down for good - businesses that have been round and couldn't hack it, particularly after Covid."

He called for the Government to ease the tax burden on catering businesses, adding: "The VAT has gone up at a really bad time for us. One way the Government could definitely help would be to cut down on the tax and VAT, that would keep a lot of us surviving and able to provide jobs.

"We employ 18 people. If we weren't to survive, along with many others, there would be a bigger problem for the government to deal with, around unemployment."

His calls echo those of Andrew Crook, president of the Leeds-based National Federation of Fish Friers, who earlier this month called on the Government to introduce VAT relief for business owners.

Lou at Opposite Cafe also advocates such help, and said she was disappointed with the lack of support offered in chancellor Rishi Sunak's spring statement.

"We were really hoping we would get to keep the 12 and a half per cent VAT for a few more months while everything settles down," she said. "Single-handedly, that would be the easiest thing they could do. Businesses could keep their prices the same but they would have the extra room to cover increases to ingredients and fuel.

"Minimum wage has to go up - you can't have everyone on the poverty line suffering even more.

"If they put it down to 12 and a half per cent, that would really help, but I can't see that happening, to be honest."