Uncertainty around Brexit fuels fall in managed restaurants for the first time in 14 years
This quarter’s Market Growth Monitor from AlixPartners shows there are 3,847 fewer pubs, bars, restaurants and other licenced premises than 12 months ago in the UK. The 3.1% decrease over the last year—the equivalent of more than 10 net closures per day—continues the trend of net closures for the fourth quarter in a row.
Restaurants, historically the key growth area of the market, have declined by 2.1% in the last 12 months and builds on the direction of travel in the year to September. Independent restaurants were driving the fall, however for the first time since 2005, managed restaurants fell by 0.1% in the year to December.
Historically, managed restaurants have driven growth, at the expense of independent operators, and for the first time in 14 years both are in decline, illustrating the pressures on the sector. Supply is currently outweighing demand and, with large groups tightening their wallets due to significant uncertainty from Brexit, it is likely these numbers will continue to tumble.
The pub and bar sector continues to suffer the most with 6,091 closures since December 2013.
Whilst the momentum is still downhill, the number of daily closures has fallen from 3.3 a day over the past 5 years to 2.7 a day in the last 12 months. The data suggests that the drink-led subsector is starting to reduce its decline as the number of closures in the period is down from previous quarters.
The above two overall themes are largely consistent with recent prior periods, the variation in certain geographic markets is significant. For example, food-led pubs and bars have increased in number by 1.5% in London compared to a decrease of 0.9% in Manchester over the past 12 months.
Overall, whilst there is decline in site numbers, there is an opportunity for well-funded restaurant groups to capitalise on the increase in available prime sites at lower prices as those less fortunate are forced into closures. Additionally, differentiated brands are driving the divergence within the sector and differentiation is of paramount importance to gain the attention of investors.
The UK hospitality industry is currently totally reliant upon EU nationals in its workforce, here is an outline of how ‘the Brexit numbers’ are already impacting on hospitality and pointing to worse to come.