Mark Kenyon: Trade's resilience being tested as never before
The Chancellor's pre-Budget Report dealt another blow to the industry. While the VAT reduction from 17.5 per cent to 15 per cent until the end of next year was well reported, the compensating increase in alcohol duty of eight per cent was less well publicised outside of the trade press, for obvious reasons.
Operators had hoped to take around 5p off a pint, which I'm sure punters would have noticed, but the duty rise will put paid to this.
I suspect many retailers won't be passing on the VAT cut in respect of food; the cost of reprinting menus compared to the actual benefit that the customer will see doesn't make sense. You then just need to relate this back to the huge discounts currently being offered in the high street - 20 per cent is widespread, and it's 50 to 60 per cent in some places.
In monetary terms, a 2.5 per cent cut equates to £5 for every £200 spent and the on-trade will have to cope again with the off-trade loss-making promotions this Christmas which will far outweigh the aforementioned calculation.
While trading is very tough and pubs are closing, it has to be said that people are still visiting pubs. Many are fantastic venues in which to spend an evening with friends. The resilience of the trade is being tested like never before, its ability to self-heal stretched to the limit, yet small improvements in elements of the economy may help.
Food prices are dropping, energy costs falling and this, in time, should boost consumer confidence and spending.
The threat of rising unemployment will dent a quick recovery and recent falls in mortgage rates have prompted people to save the difference rather than spend, at the moment.
As a nation we love a bargain and great value for money. That means the offer has got to be right, the welcome warm and engaging.
What is important to remember is that leisure spending has inextricably changed since the last recession. In the past, going out was deemed a luxury, nowadays as a nation going out is pretty much a way of life.
In more uncertain times people will continue to do so but there may be a degree of trading down. This is apparent at this time of year - in many cases corporate Christmas party budgets have been slashed. There is no doubt that numbers will be down but it still won't deter people from going out and enjoying the festive season with their work colleagues, albeit in smaller groups and perhaps at their own expense.
The recent Survey-Shack survey questioned more than 1,000 UK diners and showed around 62 per cent plan to eat out the same number of times or more than the festive season last year. Nearly 63 per cent said that price was not the major factor influencing whether they chose to eat out or not.
There is no better time to look at doing radical offers to get people through the doors; so getting creative is key! These might include incentive-driven loyalty card schemes, creative promotions on seasonal themes, building awareness around low-alcohol alternatives which are particularly popular at this time of year, or even promoting cheaper alternatives.
Concentrating on the offer and adding value will be crucial to drive footfall, so that as many people as possible can experience the atmosphere of the great British pub. As an industry we need to get away from the perception that pubs are drinking dens, where you must have six pints and then stagger home.
If people have got less in the wallet and average spend is less, then driving footfall (so we see a fall in one-time visitors) has got to be a way forward. More people visiting less often is better than fewer people visiting altogether.
Legislation could be introduced to ban happy hours and discount drinks promotions, so what will the industry's response be? It is a close-knit industry and needs to speak with one voice. The sum of the parts is greater than the whole.
Mark Kenyon is head of licensed trade at Barclays Commercial Bank
