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Morning Briefing for pub, restaurant and food wervice operators

Thu 20th Oct 2022 - Hospitality loses 2,200 sites in three months as business cost challenges mount, nightclub numbers down 5.6%
Hospitality loses 2,200 sites in three months as business cost challenges mount, nightclub numbers down 5.6%: Britain’s licensed sector saw a net decline of one closure every hour in the third quarter of 2022, the latest Hospitality Market Monitor from CGA and AlixPartners reveals. It shows there were just under 104,000 licensed premises at the end of September 2022 – a net drop of 2,230 since June, which represents an average of just over 24 closures a day, or more than 150 per week. This latest decline leaves the licensed market with 11,426 (or 9.9%) fewer sites than March 2020. It follows a year of relative stability as hospitality built back from covid, with the number of sites at June 2022 virtually the same as 12 months earlier. The report from CGA and AlixPartners reveals a sharp contrast in the fortunes of managed hospitality groups and independent operators. While the number of managed sites is 3.0% below pre-covid levels it increased by 0.9% (up 179 sites) in the last three months, but the independent sector contracted by 2.6% (minus 1,751 sites). High street, suburban and rural locations all recorded same net decline of 2.1% in licensed premises between June and September. By region, quarter-on-quarter declines varied only slightly, from a low of 1.6% in the south and south east to a high of 2.9% in Scotland. Britain’s number of nightclubs has fallen by 5.6% in the last three months alone, and the sector now has around a quarter fewer sites (down 309) than it did before the pandemic. Karl Chessell, CGA’s business unit director for hospitality operators and food, EMEA, said: “These numbers show how hospitality’s steady recovery from covid is now under severe threat from rising costs for businesses and consumers alike. The resilience and confidence of managed groups and their investors is impressive, and people’s appetite for eating and drinking out is undimmed. However, thousands of smaller businesses are now on a knife-edge and in need of financial support.” Graeme Smith, managing director at AlixPartners, added: “This volatility will also inevitably trigger market activity as companies are forced to restructure and merge in order to find cost savings, and additionally, as those that can – with the strength of balance sheet and financial firepower – acquire other groups.” UKHospitality chief executive Kate Nicholls said: “It is truly saddening to see this scale of losses over the last quarter. UKHospitality forecast this summer that we could lose 10% of the industry if adequate support was not offered and it would appear that prediction is bearing true. There is no time to waste – there now needs to be considered and urgent action to ensure businesses can survive.”

Tourism and recreation sector sees output fall at the fastest pace in 18 months as consumers rein in spending: The tourism and recreation sector, which includes pubs and restaurants, experienced the sharpest fall in output of any UK sector in September, according to the latest Lloyds Bank UK Sector Tracker. Output in the sector contracted at the fastest pace (36.3) since February 2021, when the UK was last in lockdown. The drop was caused by demand – represented by new orders – falling for a fourth consecutive month (38.5) as consumers reined-in discretionary spending amid rising inflation. However, five of the 14 UK sectors saw output grow in September – versus three in August – while the same number saw new orders grow versus three in August. A reading above 50 on the tracker indicates expansion on an index, while a reading below 50 indicates contraction. Elsewhere, the tracker showed overall input cost inflation for businesses intensified in September for the first time since May (77.4 versus 76.6 in August). The increase was driven by rising energy prices for manufacturers, reported by a record number of firms, surpassing a previous peak during the 2008 oil price shock. However, while cost inflation accelerated month-on-month, there were positive signs of a gradual improvement in price pressures quarter-on-quarter. Between the second and third quarters, the average pace of input cost inflation slowed in all 14 sectors monitored by the tracker. This was supported by easing wage and shipping cost pressures – with reports of higher shipping costs reaching a 21-month low in September. Meanwhile, the pace of inflation in prices charged to customers slowed in 12 sectors.

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