Market Recovery Monitor – After a brutal 2020, a roadmap to reopening is desperately needed

News that the UK pub bar and restaurant market has seen a net decline of nearly 6,000 sites during 2020 will come as little surprise to those following the events of 2020 in the industry.

At nearly three times the level of that recorded at the end of 2019, it’s clear that the effects of COVID-19 have ripped through the sector in the previous calendar year, right to the last with the effective cancellation of Christmas for the industry due to Tier 3 and 4 restrictions imposed across almost all of England and the similar measures imposed in Scotland and Wales.

As our latest Market Recover Monitor report shows in its full-year review of 2020, no segment, location or sub-sector emerged unscathed.   

The challenging end to last year, when the vast majority of operators were forced to close at what should have been the busiest time of year, ended a brutal 12 months for the casual dining sector in particular, which saw a net decline of 9.7% and will undoubtedly have caused more business failures.

Also particularly striking is the impact of the pandemic on independents, accounting for nearly three-quarters of the total permanent closures. Historically this sub-segment has been the most dynamic and innovative in the sector, but significant numbers have failed because they aren’t able to draw on the greater financial resources that have allowed managed groups to better ride out the storm. Our data for 2020 showed a net decline of 5.5% amongst independent sites versus 3.2% amongst managed sites.

The wave of closures seen across the hospitality sector in 2020 have been devastating. Longer term this may bring opportunities for ambitious operators, by freeing up property and labour and reducing competition and costs. However, right now survival remains the name of the game. The Government support that followed this latest lockdown is a drop in the ocean for many operators, who continue to accrue debt and burn through cash. Critically, unlike the first lockdown, operators now don’t have the benefit of a cash pile generated through the key Christmas trading period.

Business agility will be critical in the period ahead. Changing consumer needs and shifts in where people spend their days due to increased homeworking, as well as flexibly managing a restaurant or pub portfolio within an evolving patchwork quilt of tiered restrictions and regulations means complex challenges remain in the sector for the foreseeable future.

Businesses, their funders, landlords and other stakeholders urgently need certainty and a roadmap to reopening. The rapid rollout of the vaccine offers hope, but with restrictions unlikely to be lifted until Easter at the earliest, the coming months will likely see more sites lost for good, and our 2020 closures data could represent just the tip of the iceberg.