Market Recovery Monitor – How many more licensed premises will fall after the 'Freedom Day' delay?

After five weeks of limited outdoor openings, hospitality had made a steady but unspectacular return to inside service from 17 May. Three quarters of licensed premises were back trading by the end of the month, and as we see in this edition of our Market Recovery Monitor, the picture had been brightening for managed groups and big cities in particular - though trading has been modest in many places.

Many operators will have reopened in anticipation of restrictions falling away on 21 June, and likely forecast and accepted suppressed trade for the period up to that point. While far from ideal, knowing that ‘Freedom Day’ was on the horizon meant operators could battle through this challenging time, perhaps welcoming team members back to the business in anticipation and getting operations up to speed.

However, just over 25,000 sites remain closed, and last week’s postponement of hospitality’s full return in England until 19 July throws the future of beleaguered operations into doubt. In addition to the fierce headwinds whipped up by mounting debt, recruitment problems, rising input costs and much more, operators now face four more weeks of severely curtailed trading - or, in thousands of cases, no trading at all.

It remains to be seen how many of these closures are temporary and how many are permanent, but constraining service for a further four weeks has shifted the balance towards the latter.

The late-night sector has been particularly hard hit by enforced COVID restrictions, and one in eight (12.3%) nightclubs have already been lost since March 2020. The postponement of clubs’ reopening in England is likely to add significantly to that tally. Casual dining site numbers have also fallen by more than 20% since pre-pandemic.

Even the venues that have been able to open have reported underwhelming sales, and CGA data shows that managed groups’ total sales in May were down by 26% on May 2019. Trading may have restarted, but it is still far off pre-COVID levels.

A further delay of four weeks is a devastating blow, creating significant uncertainty and further financial strain, in particular for drink-led venues. At a time when Euro 2020 is in full swing and there is a feelgood factor across the country, this extension to restrictions could not have come at a worse time for pubs and other drink-led venues. The delay is a setback for companies’ financial plans and will ramp up the pressure on balance sheets even further.

While the rent moratorium may have been extended into next year, there is a toxic cocktail of costs for operators to swallow, which not only casts doubt as to how many of those venues still closed will actually reopen under their current ownership – but whether those trading will have to shut their doors again. Britain already has nearly 10,000 fewer licensed premises than it did before the pandemic, and fresh, sustained support is going to be needed if many more fragile businesses are to make it through.