Spread of variant and government guidance to work from home led to painful losses by year end
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First published on Thu 13 Jan 2022 08.59 EST
Pubs, bars and restaurants missed out on £3bn in sales over the festive period as the spread of the Omicron coronavirus variant kept the public at home, resulting in a second “lost Christmas” for financially embattled proprietors.
Sales slumped 60% on Christmas Day, 31% on Boxing Day and 27% on New Year’s Eve, compared with 2019, pushing pubs, clubs and restaurants from healthy trading at the start of December to “painful losses” by year end.
“December is a vital period for hospitality businesses, equal to three months’ worth of trading for many,” said Kate Nicholls, chief executive of UKHospitality, which compiled the figures with consultancy CGA. “These new figures are crippling for an industry already struggling but also spell disaster for the wider UK economic recovery.”
UKHospitality said in the run-up to December sales had returned to 98% of pre-pandemic levels, but the spread of Omicron and government guidance to work from home was once again stretching the financial viability of pubs, bars and restaurants.
“Cash reserves are severely depleted, and some businesses will struggle to survive the first quarter,” said Nicholls. “These drops in sales versus 2019, and also against our members’ projections before the onset of the new Omicron variant, will have taken most businesses from healthy trading for the month to painful losses, delaying the sector’s recovery and extending hospitality’s long Covid.”
The plight of proprietors was highlighted in a trading update from the pub and restaurant group Mitchells & Butlers, the owner of chains including O’Neills, Harvester, All Bar One, Toby Carvery and Miller & Carter, which reported a 10.2% sales slump in the four weeks to 8 January compared with 2019.
The company had seen sales running at 2.7% ahead of 2019 levels in the eight weeks to 20 November, before Omicron emerged. M&B also said that costs were set to rise from the pre-Covid £60m to £65m annually, “due particularly to high levels of statutory wage rate increases and persistent historic high prices in energy markets”.
“The group is in a reasonable position for when things start to get back to normal,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown. “Although the amount of times that has been said in the last couple of years is best left uncounted.”
Nicholls said hospitality businesses were facing severe headwinds this year, as well as inflationary pressures as the “cliff edge” approaches when the government increases the rate of VAT on the sector from 12.5% back to 20% and there is a rise in business rates.
On Friday, the Office for National Statistics said that 40% of all hospitality businesses say they have less than three months of cash reserves, including 11% with none at all. Also, 17% of these hospitality firms have low or no confidence of surviving the next three months, the gloomiest outlook across the economy.
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