22/09/2021
18 months on from the announcement of lockdown restrictions and walking the streets I see pubs, bars, restaurants, hotels and even nightclubs throughout all four parts of the country are open and seemingly enjoying a boom in demand.
The furlough scheme has, in large part, protected jobs within the industry and for some, the rent reductions offered by landlords have both kept the wolf from the door and enabled a swift bounce back.
If I had been cryogenically frozen for the last year and a half I may be mistaken for thinking that very little has changed on a superficial level, other than the continued use of apps to order. Dig deeper however and there are some long Covid issues circling.
The leisure industry and leisure markets within the nation itself, are too diverse to either diagnose, or indeed, provide a one size fits all prognosis. However, there are some all-pervading factors, coupled with some more specific ones that are and will present challenges to our long challenged industry.
A glass is either half full or half empty depending on your outlook. The various restrictions ending in the late spring and summer of this year enabled a return to 'normal' trading. Although staggered and uneven throughout the UK, it may be stated at the current date we are more or less able to eat, drink and stay in the same way we did prior to the start of Covid. Normality in itself is a huge benefit to the industry.
Add to this the dominance of staycations, the willingness of customers to get back to offline socialising, formerly known as 'meeting your mates' and the strong spending from those who have not seen a fall in income, the picture presents well. National and local operators have reported strong like-for-like sales when compared to pre-Covid levels; as they did last year following the easing of restrictions.
The benefits for operators continue, with ongoing business rates reductions and partial VAT free trading. Boom time? Well, for some yes, at this moment in time.
It is at this point however that the anxiety is starting to really kick in.
Firstly we have the obvious sword of Damocles, Covid itself. Much has been made of the fantastic efforts not only to engineer a vaccine but to distribute it to around 90% of the adult population.
Despite this however, all will be wary of winter and much will rest on the continuation of trade. More restrictions and even lockdowns will be painful for all and fatal for some businesses. The seasonal loss of all but the most well heated of external areas, or indeed the most hardly of individuals, will be loss enough.
Secondly, what is given in concession must come to an end. VAT reductions, Business rates and national insurance cuts are all to be phased out. To clumsily expand the sword of Damocles analogy, this is double edged. Simply put, whatever the circumstances of an operator, a return to normality will bite.
Now to multiply the calculation, add the twinned Covid/Brexit pressures on wage and raw material costs. It is impossible to say to what level this is Covid or Brexit, following the final deal, and it is irrelevant in any case. The issues have presented concurrent problems which will be faced together as a whole. Aside from health implications, the immediate impact of Covid on the workforce in leisure venues has been a frustrating and damaging system of self-isolation, often for teams of workers. This is combined with staff shortages caused, at least in part, by overseas workers unable or perhaps less willing to return to the UK.
Price inflation is on the rise and most will have noticed the increase in the price of a pint or dining out. Pricing seems to be the only thing which is capable of breaking Newton's law. What goes up ... is likely to go up again, and again. The number of 'agains' however is limited. The tightrope walk is a fine art, with the precipices of both loss of profitability and loss of customers something which is likely to be faced moving forward. It would be something of a surprise if all of the cost pressures could be passed on to customers, something which will be painful to businesses across the leisure spectrum.
Finally the other big hitter - debt. Much has been said about so called 'zombie jobs', fortunately little of this has become reality as yet. In the leisure sector there is quite the opposite, thankfully. However, there may be more in the concept of 'zombie companies', chiefly due to the levels of debt they are now contending with.
The loans offered by the government have been a vital lifeline, as has some landlords rental concessions, combined with director loans and indeed more regular types of bank finance. Obviously this money does need to be repaid at some point and it is a concern that many will be saddled with debt.
Debt could stop the defensive spending we saw in the last recession, leading to stagnation and decline in offer. Churchill's words as applicable today as they were 80 years ago; to change is to improve, to be perfect is to change often.
The spectrum of landlords is, as ever, varied with outstanding examples of benevolence and pragmatism from a great many. For those with less scrupulous landlords however, the bill has been racking up with potentially more tools available to landlords as legislation changes.
Myriad headwinds within each business will require each to navigate its own course around the icebergs. What is clear, however, is that the icebergs are forming. The leisure market is however, nothing if not resourceful and dynamic, and, challenges have been faced in the past. Above all, the industry has surely faced its greatest threat, closure. What could be more encouraging than the response following reopening?
The demand shown for all manner of leisure businesses has, without any doubt, shown the intrinsic viability of the sector with the underlying demand seemingly stronger than ever. Plain sailing in the leisure industry has always been a fallacy. Despite some gathering headwinds and changing courses, opportunities will be continually seen with concepts changed and fundamentals retained.