Market Recovery Monitor – Issue 6 – A nightmare before Christmas for the UK Hospitality sector

The landscape of the UK pub, bar and restaurant market is changing by the day. As England’s second nationwide lockdown ends, another compilation of tiered restrictions and regulations across the UK emerge, with associated Government support information for site operators to analyse.

As we predicted last month, the reinstatement of regional tiering post-lockdown was the likeliest scenario for England to seek to maintain control of the spread of COVID-19. However, this is now also likely to deliver a nightmare before Christmas for the 98% of site operators located within Tier 2 or 3 regions, as detailed in the latest Market Recovery Monitor report.

We anticipate that up to 50,000 licensed premises could keep their doors closed for at least the first two weeks of this month before the tiering system is reviewed again by Government, adding further gloom to what has already undoubtedly been an ‘annus horribilis’ for the hospitality sector.

While we would ordinarily now be entering the most important four trading weeks of the year, the overwhelming majority of businesses are now operating under crippling conditions. Figures from UKHospitality suggest the sector could see around £7.8bn of revenue wiped out with the tiering system in place, compared to last December.

The picture was already bleak for traders in Scotland and Wales during November, while all of England’s sites were closed. Just 6.2% - or 6,890 - of Britain’s pre-lockdown total of licensed premises was trading at the end of last month.

Some regions in Scotland remain subject to closures, meaning that only two in five (40.4%) of its sites were open at the end of November, only slightly bettered in Wales at 42.2%. However, the latter country’s pubs and restaurants are now facing the prospect of further restrictions on alcohol sales and opening hours from Friday 4 December. Recent figures from the British Beer and Pub Association (BBPA) estimate that only 27% of pubs in Britain were able to open on Wednesday due to the restrictions in place.

Site operators will be desperate for some positive news in a fortnight when the tiering restrictions are reviewed again by Government (16 December), but for many this will come too late as the potential for buoyant festive trade post-lockdown in December is sharply curtailed by the latest restrictive measures.

What’s critical now is how these businesses survive until the point that an effective vaccine is rolled-out across the country to hopefully allow society to open back up and return to normality.

Many larger groups may have funds to sustain them through the tough times ahead and may find themselves in a stronger position next year due to attractive deals available from landlords to take new sites and potential M&A opportunities. This week’s approval of a UK vaccine also provides further hope of a return to something resembling normality over the next 12 months, but cash reserves will be needed to bridge to that point.

However, smaller operators  – which are unlikely to be as well capitalised - face a highly uncertain future and may not be able to hold on until normal service resumes. The Government’s latest offer of additional financial support (£1,000 per wet-led site) appears unlikely to be sufficient to enable all businesses to survive.

The question now is how many of these sites we will actually see reopen in the New Year and how many we have sadly lost for good.