Consumer squeeze to continue throughout 2011

The squeeze on leisure spending seen in the second half of 2010 is set to continue throughout 2011, according to finance recovery specialists Zolfo Cooper.

Writing in the firm's latest 'Leisure Wallet Report', which assesses the prospects for a number of leisure sectors including the on-trade, Paul Hemming, a partner on the firm's corporate advisory services team, said regional differences that marked trading last year would be maintained.

Operators in London and the South East were best placed to escape the worst impact of VAT rises, cost inflation and reductions in government expenditure.

Unsurprisingly Hemming said lower consumer demand will "polarise performance. Relevant, well-run propositions will thrive but only at the expense of their rivals".

The Olympics effect would also start to kick in for those in the capital and the South East, who would also loom large in the ambitions of private equity and mergers and acquisition specialists, he added.

Additionally, Zolfo Cooper surveyed 1,000 18 to 24 year olds, finding that this age group would continue to spend, albeit less than before, while among the 1,000 over-55s polled spending was the same across various leisure activities compared with six months ago.

Belt-tightening appeared greatest among the 1,000 consumers polled aged between 35 to 54 years, it added.

A panel of experts convened by Zolfo Cooper also argued that banks would be looking harder than ever at the quality of a company's management before lending. "Cash was available for the right deal in 2010, and we see no reason for a material change to this in 2011. What will be key is management's track record," the report said.

Private equity specialists contributing to the report argued that the banking environment continued to be "fragile", and future deals will be "safer", with risk profiles "more reflective of the likely returns".