Food inflation might have fallen but will the cost of eating out ever go down?

With eating out costing more than ever, the news that food inflation has fallen to 3.4 per cent, the lowest since September 2021, sounds like it should be good news. But, while we’ll all be relieved by a break from surging supermarket prices – nearly £8 for a litre of olive oil, anyone? – it’s important to remember that falling inflation doesn’t mean falling prices, as a third of Brits mistakenly believe. It simply means that prices continue to rise at a slower rate.

The picture for restaurants is somewhat bleaker. Food inflation in the hospitality industry has only fallen to 12 per cent, 2.4 times higher than in retail. Restaurants that have managed to survive the maelstrom of challenges over the past few years have inevitably had to pass costs onto menus, with consumers picking up the bill. And with the “common user charge” – the latest aftershock from Brexit – now in effect on our borders, prices won’t be going down any time soon.

But, despite what we might assume, the cost of food is barely a drop in the ocean of problems driving up the cost of eating out.

“It’s not the cost of ingredients per se,” says Andrea Rasca, the sharp-tongued founder and CEO of Mercato Metropolitano, a group of food markets across London. “Brexit is killing us. And, sorry to be blunt, it’s the dumbest thing on earth. Nobody can convince me of the opposite. The only people who believe in it are elderly people with financial interests.”

Rasca, an Italian who now considers himself a Londoner, opened the first Mercato in Elephant and Castle in 2016 and is preparing to open a fourth in Ilford later this year. But the differences between opening a restaurant then versus now are stark. “People, people, people. I cannot find enough people because they’re not coming here any more. I cannot hire a waiter from Spain or Italy who wants to come here and learn the language and work.”

Finding British staff is just as difficult, he says. “British people got too rich to think that they can be waiters. They don’t understand that when you do it for a purpose, serving food is one of the most noble things in the world.” In a country plagued by endless cooking shows, it’s easy to name a famous British chef – heck, even a critic – but what about a famous maitre d’ or waiter? (The First Dates guy doesn’t count.) Most Brits still don’t consider a front-of-house job in a restaurant to be a viable career unless it’s a teenage Saturday job or a mid-twenties stopgap; whereas in Europe, waiting tables is a viable vocation for all ages worthy of as much respect as, if not more than, the chef.

James Robson, co-founder of the hugely popular nose-to-tail restaurant Fallow and the newly opened Roe, agrees that staffing is the principal issue, one that diners probably don’t think about. “Although it’s welcome, food inflation coming down hardly scratches the surface of a restaurant business,” he tells me. While he’s quick to admit that Fallow is one of the lucky ones – it’s doing well against the odds and relies predominantly on British staff and suppliers –  he can see the impact Brexit is still having across the entire industry. “We are literally attacking immigration, which is ridiculous. The fact of the matter is simple. Europe’s got a lot more respect for our industry as a whole than the UK does. That’s reflected in the number of people coming here or the number of people that want to go into the industry. It’s a generational thing. But the cost of staffing is so incrementally high that that’s the main issue.”

So next time you’re shuddering at the bill, consider more than just what’s on your plate. For example, in a recent video on Fallow’s Instagram, head chef Will Murray explains how they balance the pricing of the menu by charging more for their bestselling cod’s head, which they source for only £3.50 a kilo, so they can charge less for the steak, which is more costly to produce. This is entirely for the benefit of the consumer and “a constant exercise”, explains Robson. But fishmongers have caught on that what was once considered a waste product is now becoming a delicacy, so the price “must have gone up like 500 per cent” since Fallow made it mainstream, he says.

Mercato, on the other hand, where the USP is high quality, artisanal products from Europe and beyond, has run into difficulties with importing. While it localises where it can, “the difficulty we have is that a lot of suppliers [in Europe] just say no. They don’t want to go through the hassle or cost of serving a country that has become so complicated. The complexity of the system is just stupid,” says Rasca.

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Also consider who’s serving your food, what they’re getting paid and what their quality of life is like – or, more importantly, what it should be. Rasca has committed to paying the London living wage to all his staff, even at a cost: “We just lowered our end-of-year projection by almost 80 per cent.” He doesn’t see it as just a moral obligation but a business one to secure the future of the whole industry. So he’s happy to take the hit, and Mercato’s business model, an aggregation of 20-50 small businesses that share the burden, can handle it – “but if you have your own little restaurant, honestly it’s almost impossible”.

There are also the hidden costs to consider. Business rates for restaurants are no joke. Restaurateurs have been calling for a cut in VAT and business rates to help the struggling sector, which has been hit, like we all have, by hikes in energy and ingredient prices, as well as staffing costs and a fall in consumer spending. In chancellor Jeremy Hunt’s spring Budget, he announced… well, nothing. Industry leaders were outraged, and everyone’s feeling the burn – even somewhere as successful as Fallow. “Taxes are going through the roof, unemployment’s through the roof, rates, council tax…” Robson says. “Where they gave us a bit of a break during Covid, 90 per cent of all the other stuff is still there and going up and getting harder.”

Robson says they’ve been lucky that the average spend at Fallow has only dropped marginally but they’ve counteracted that by accommodating a slightly larger volume of customers, opening for breakfast, and opening earlier on the weekends. “Look, people are rightly looking after their money a bit more. It’s tough out there, we know that. But the pressure on us to perform is even higher.” Rasca, too, has seen a decline in spending at Mercato, rather than in visitor numbers. “They are spending one pound or less on average but we’re talking about big numbers here; remember we have six to seven million visitors a year,” he says.

Part of the problem, as Rasca sees it, is a lack of prioritisation for independent hospitality businesses rather than global chains and franchises. “The banks and real estate companies in the UK don’t like us,” he says. “They like people like McDonald’s, who have a lot of cash, who pay a lot of taxes, so our politicians are happy.” This, he suggests, is pushing consumers towards fast food franchises, which is having a knock-on effect on public health. “Actually, I almost understand it from a political point of view. It’s easier to control people who are unhealthy. If kids eat terrible food, their brain development lowers, so I understand it. But it’s Orwell. It’s 1984. This is what I’m scared of. This is not the London I came to in 2016.”

It’s certainly a scary prospect, if not an outlandish one, but what’s to be done? Will the cost of eating out ever go down? If history is anything to go by, probably not. The last time inflation dropped into negative figures, therefore becoming deflation, was in 2015 because of a sudden drop in the price of oil. Before that was in 2009, during the global financial crisis. Before that… was in 1960. So the cost of living crisis might end somewhere in the region of three or 50 years. When we take into account that real pay growth was 2.4 per cent in the first quarter of the year, the highest since July 2021, we can safely add a few more years to that estimate.

Robson and Rasca aren’t that hopeful either. Robson favours stability. “I would suggest we see six to nine months of falls before we can consider cutting prices,” he says. Rasca, meanwhile, wants to see change from above. “Even if you don’t want to be in the EU, open the commercial trade market and let people travel and come to the UK. Secondly, make trade agreements with the EU so we can import easily. And then I really have to wish for better business rates and control on the rents.” Perhaps I should have told him it’s against the rules to wish for more wishes.

“It’s time for you and your generation to start shouting,” he adds. I promise him I’ll write the article in capital letters. I haven’t, but I hope the message is still loud and clear.