Food Inflation Has Fallen, But Does That Mean Eating Out Will Get Cheaper?

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While it’s true that food inflation has dipped to its lowest since late 2021, this doesn’t necessarily mean cheaper dining experiences. 

Promising Decline in UK Inflation Rate


Earlier this year, the rate of inflation in the UK sharply declined, marking the lowest level in the past two years. This significant drop is largely attributed to the easing of food prices, which has brought some relief to households grappling with the ongoing cost-of-living crisis.

Inflation Hits a Low at 3.4%


Data from the Office for National Statistics (ONS) indicates that the Consumer Prices Index (CPI) inflation rate fell to 3.4% in February, down from 4% in January, reaching its lowest point since September 2021. 

This decline brings the inflation level closer to the 2% target set by the Bank of England, just in time for its upcoming interest rate decision.

Dining Costs Slow, But Still Rise


Grant Fitzner, chief economist at the ONS, highlighted that the primary factor behind this decline was the stabilization of food prices, which have remained almost unchanged this year compared to significant increases last year. 

Additionally, the rate of price increases in restaurants and cafes has also slowed down. 

Slight Relief in Supermarket Pricing


Though supermarket shoppers might breathe a sigh of relief over somewhat stabilized prices, the scenario isn’t quite the same for dining out. 

This reduction in inflation means prices are still climbing, just not as swiftly as before.

Is Eating Out Becoming a Luxury?


The hospitality sector paints a grimmer picture, with food inflation there standing at 12%, significantly outpacing the retail segment. 

Restaurants, weathering a storm of economic pressures, have had little choice but to adjust their menu prices upward, making diners bear the burden of increased costs. 

Add to this the newly implemented “common user charge” post-Brexit, and it becomes clear: lower costs for eating out remain wishful thinking.

Brexit Adds to Dining Cost Woes


The challenges extend beyond the raw cost of ingredients. 

Figures like Andrea Rasca, founder of Mercato Metropolitano, highlight deeper issues such as Brexit’s impact on the industry, expressing frustration over its perceived lack of merit and pointing out that its support base is narrowly confined. Thus, while lower food inflation might seem promising, it barely scratches the surface of factors inflating dining costs.

Mercato’s Growth Faces New Obstacles

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Andrea Rasca, having launched the inaugural Mercato in Elephant and Castle back in 2016, is gearing up to open a new location in Ilford. 

Yet, the hurdles he faces today starkly contrast those from six years ago. 

Staff Shortages Impact Restaurants


Rasca shares the struggle of not being able to find enough staff because fewer are coming to the UK, making it tough to recruit waiters from countries like Spain or Italy who are eager to learn the language and embrace the work. 

British Workers Turn Away from Serving

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The scarcity extends to British workers too, who, in his view, no longer see waiting as a viable job. Many Brits, enriched by other opportunities, fail to see the nobility in serving food—a profession highly regarded across Europe as a respected career at any age.

Staffing Crisis Hits Restaurants Hard


James Robson, co-founder of Fallow and Roe, echoes these sentiments, highlighting staffing as the critical issue in the restaurant business today—a concern likely unconsidered by most patrons. 

Brexit Exacerbates Workforce Shortages

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Despite the success of his establishments, which rely mostly on British staff and suppliers, the lingering effects of Brexit on the industry are profound. Europe holds the industry in higher esteem than the UK does—a fact that’s reflected in the workforce shortages here. 

The main challenge now is the high cost of staffing.

Beyond the Dish


When considering the price of your meal next time you dine out, think beyond the dish itself. Take Fallow’s approach, for instance, where pricing strategies are innovatively used to balance menu costs. 

The Rising Cost of Cod’s Head


Head chef Will Murray recently shared on Instagram how they price their popular cod’s head higher—sourced at only £3.50 a kilo—to offset the steeper costs of their steak dishes, ultimately for the consumer’s benefit. 

However, as this once-overlooked fish part gains delicacy status, its cost has skyrocketed by approximately 500%, a reflection of changing market dynamics and challenges in sourcing ingredients.

Why European Suppliers Avoid the UK


Mercato, known for its unique selling point of high-quality, artisanal products sourced from Europe and beyond, is facing significant hurdles in importing. 

The complexities introduced by regulatory changes have led many European suppliers to avoid the hassle and cost associated with exporting to a more bureaucratically intricate UK. 

The Struggle to Keep Mercato Unique


Andrea Rasca highlights how the system’s complexity has become a major deterrent. 

While Mercato strives to source locally where possible, the resistance from European suppliers is palpable, impacting the availability of their distinctive offerings.

The Cost of Ethical Business Practices

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You also want to consider the economic realities of those who serve your meals. 

Rasca is committed to paying all his employees the London living wage, a decision that, while reducing the company’s end-of-year profit projections by nearly 80%, is viewed not only as a moral responsibility but also as a strategic business move to sustain the industry’s future. 

Shared Burdens


Mercato’s business model supports this approach by aggregating 20-50 small businesses that share the financial burden, making it feasible, though still challenging for smaller establishments.

The Rising Costs Behind Your Restaurant Bill

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The broader landscape includes escalating hidden costs that restaurateurs must handle. Business rates for restaurants are substantial, and despite calls for reductions in VAT and business rates to support the struggling sector amid rising costs for energy, ingredients, and staffing, recent fiscal policies have offered little relief. 

No Relief in Sight for Dining Costs

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James Robson of Fallow echoes this sentiment, noting the ongoing financial pressures, including increased taxes and council rates. Where there was some respite during Covid, now almost 90% of the burdens are back and intensifying.

Increasing Customer Volume at Fallow


Robson points out that Fallow has managed to maintain its revenue by slightly increasing customer volume, extending operating hours, and introducing breakfast service. 

The Unhealthy Trend 

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Andrea Rasca articulates a significant concern regarding the prioritization of global chains over independent hospitality businesses in the UK. He notes that banks and real estate companies favor established franchises like McDonald’s due to their financial robustness and substantial tax contributions, which pleases politicians. 

This favoritism towards fast food franchises is pushing consumers towards less healthy options and is impacting public health. 

Dystopian Warning on Diet


Rasca suggests a rather dystopian view, fearing that promoting poor dietary habits could lead to diminished cognitive development in children, echoing themes from George Orwell’s “1984.”

Is Deflation a Rare Phenomenon?

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The prospect of reducing the cost of eating out seems bleak. 

Historical trends suggest that deflation, which last occurred briefly in 2015 due to plummeting oil prices, and before that during the 2009 financial crisis and even earlier in 1960, is rare. 

Real Pay Growth Amidst Stagnant Costs


Given that real pay growth was reported at 2.4 percent in the first quarter of the year, the highest since mid-2021, expectations for any significant decrease in living costs may extend well beyond the foreseeable future.

Cautious Hope for Dining Cost Reductions


Both James Robson and Rasca express limited optimism about immediate improvements. Robson advocates for sustained stability, suggesting a wait of six to nine months of consistent economic declines before considering price reductions in dining. 

Calling for Systemic Changes


Rasca, on the other hand, calls for broader systemic changes. He urges the UK to foster more open commercial trade, especially with the EU, to ease imports and improve mobility. 

Additionally, he hopes for more favorable business rates and rent control—essential for the survival and growth of independent businesses.

Optimism from the Prime Minister


Prime Minister Rishi Sunak described the recent inflation figures as a significant turning point for the economy, noting that inflation is returning to normal levels. He expressed optimism about the future, emphasizing that brighter days could be on the horizon. 

However, he stressed the importance of adhering to the current economic strategy, which aims to enhance economic security and opportunities for everyone, as essential for maintaining these positive figures. 

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Kate Smith, a self-proclaimed word nerd who relishes the power of language to inform, entertain, and inspire. Kate's passion for sharing knowledge and sparking meaningful conversations fuels her every word.