London’s hospitality sector stabilises in first quarter of 2023

27-Jun-2023 - Last updated on 27-Jun-2023 at 10:00 GMT

Looking up: London's hospitality sector steady but challenges remain (Credit: Getty/ Gary Yeowell)

Central London’s hospitality sector is recovering after suffering hundreds of closures of licensed premises during the turmoil of Covid, according to the latest Hospitality Market Monitor from CGA by NIQ and AlixPartners.

Research for the monitor showed central London saw a net decline of 540 licensed premises in the three years between March 2020 and March 2023 – 15.6% of the city’s pre-Covid total, and equivalent to one closure every two days.

The heavy toll reflected London’s dependence on commuters and domestic and overseas tourists for hospitality visits.

With millions of people working from home, and international travel severely restricted in 2020 and 2021, many pubs, bars, and restaurants – especially independent ones – became unsustainable.

However, the return of office workers and visitors since 2022 means the downward trend may be bottoming out.

CGA director for hospitality operators and food, EMEA, Karl Chessell said the slowdown of closures was a very welcome sign for London’s hospitality scene, which was disproportionality hit by Covid lockdowns and working from home.

Challenges ahead

He added that London businesses still faced some “daunting” challenges including high inflation and labour shortages, so more closures could be expected. However, he said it was clear to see the sector was back on its feet.

The monitor indicated that London saw a net decline of only 1% of its licensed premises in the first quarter of 2023, after a dip of just 0.2% in the fourth quarter of 2022.

This improving picture is reinforced by figures from the Coffer CGA Business Tracker, which has shown that year-on-year sales growth for managed operators within the M25 has been around twice as high as in the rest of Britain over the first few months of 2023.

London’s city centre is by far hospitality’s most concentrated and significant market in the UK, with nearly 3,000 licensed premises – more than Britain’s six next biggest city centres put together.

Encouraging stabilisation

AlixPartners managing director Graeme Smith said: “This stabilisation of such an important hospitality market is encouraging and clearly underpinned by a return of significant footfall to central London.

“We may see ongoing closures as more vulnerable and indebted businesses succumb to the demanding trading environment.

“However, we know that London remains a highly attractive market in the longer term, for strong operators with well-defined and differentiated propositions.

“As inflationary cost pressures ease, we would expect to see the capital return to site growth—possibly as soon as the third or fourth quarter of this year.”