Yahoo Finance ‘It’s pretty brutal out there’: Struggling UK pubs and restaurants pray spirit of Christmas past will reappear
It’s been four long years since Britain’s pubs and restaurants enjoyed anything approaching a normal Christmas.
In typical years, a month-long flurry of festive parties, family lunches and post-work debauches catapults the industry into profit, helping make up for leaner times. But last winter the energy crisis sent overheads soaring, in a sector where margins are already wafer-thin. And rampant inflation forced many would-be merrymakers to tighten their belts.
The Christmas before was still pandemic-affected and the one before that was essentially a write-off, due to strict lockdown rules. So is 2023 the year that the industry comes roaring back to party like it’s 2019? It seems unlikely.
“It’s pretty brutal out there,” said James Chiavarini, who runs a neighbourhood pizza restaurant, Il Portico in Kensington, London.
“You have to run a lot harder and work a lot faster to make the money people used to make in the past,” he said. “The legacy of the pandemic, the cold weather, flu season, the cost of living crisis, war in Gaza … it’s all just taken a toll on the nation’s mental health. People just aren’t splashing the cash, and I understand why.
“They will still go out to the Michelin-starred places in central London where the hedge fund crowd go. Everyone else will have to make do.”
It’s early days to assess current festive trading, but figures from hospitality payroll services supplier S4Labour showed that sales in London were up 3% in October versus last year, but fell 2.5% outside the capital.
“The whole thing is starting to seep into people’s sense that it won’t be a very jolly Christmas,” said Chiavarini.
There are some glimmers of hope, but it’s relatively thin gruel rather than a festive banquet of optimism.
For instance, 29% of the leaders of major hospitality businesses say Christmas bookings are up on last year, while 58% are optimistic about trading, marking a fourth consecutive rise in confidence, as measured in the business confidence survey from industry analysts CGA.
But independent businesses are much gloomier, with 40% reporting bookings down on last year and nearly a quarter saying they were pessimistic about Christmas trading.
A separate survey by the four major hospitality trade bodies found that 44% of members said they were behind on Christmas bookings compared with last year, with just 23% saying they were ahead.
Some apparently heartening trends mask the true picture. Managed pubs, restaurants and bars had reported 13 consecutive months of like-for-like growth as of October. But the increased revenues have not kept pace with costs that are rising less sharply than they were, perhaps, but still at a rapid clip. “There is no escaping the fact that rises are being driven by price rises and remain below inflation,” said Karl Chessell, director of hospitality operators and food at CGA.
A normal year would be one where you didn’t have the pandemic as a precursor and the cost of living crisis
“Consumer demand for hospitality remains high, but venues will have to be at the top of their game to achieve real-terms growth over the crucial run-in to Christmas.”
Stosie Madi, chef-patron of the award-winning Parkers Arms, near Clitheroe in rural Lancashire, said 2023 has not been the return to form for the industry that many might have hoped for.
“I wouldn’t exactly call this year normal,” she said. “A normal year would be one where you didn’t have the pandemic as a precursor and the cost of living crisis.
“We’re very fortunate because we’re long-established and have a clientele base that keeps us going. But in relation to 2019, bookings are about 10% down.”
One point on which most in the sector agree is that VAT on food and drink, charged at 20%, is too burdensome, particularly when compared with much lower rates paid by counterparts in Europe.
“We’ve been campaigning to get it dropped because it’s a massive burden and businesses are closing because they can’t deal with the high costs,” said Madi.
Chiavarini warned that the start of 2024 could be punishing for the industry, given the timing of tax collection and an early Easter.
“Corporation tax is paid in January, VAT in February. Then you’ve got an early Easter that falls in the first quarter, so people [customers] will be on holiday.
“I’d expect a lot of places to be on the market come April and May.”
