Licensed market sees net decline of 8% since 2020

Britain’s number of licensed premises contracted in the first quarter of 2022, resulting in a net decline of 8% since the pandemic began, according to the latest Market Recovery Monitor from CGA and AlixPartners.

The monitor indicates a net change of -0.9% in the number of licensed premises since December 2021, with 9,200 fewer sites in the licensed market since the start of the pandemic. Nightclubs have suffered a significant quarter-on-quarter net decline of 1.7% while drink-led community pubs saw a decline of 1.5% over the same period. Channels including bars and casual dining growths have seen modest growth.

While the 0.9% decrease represents a slowdown in the rate of closures since 2020, current pressures on the industry may impede recovery and cause further closures due to a combination of the expiration of the rent moratorium, the end to VAT relief, and rising energy, food, and labour prices.

The data further points to a divide between independent and managed operators. The independent sector has seen an 8.7% net decline in sites since 2020, as compared to 4.8% in the managed sector. Inflationary pressures could exacerbate this trend, according to CGA and AlixPartners.

Karl Chessell, CGA’s director for hospitality operators and food, EMEA, said: “Consumer demand and investor confidence remain strong, and it has been encouraging to see a stream of new entrants into the market in early 2022. But while they have kept numbers of licensed premises nearly flat on the surface, there is a lot of turmoil going on underneath. Heavy inflationary pressures and staffing and supply issues are making conditions extremely difficult, and we can expect to see a steady flow of both closures and new openings as the year goes on.”

Graeme Smith, a managing director at AlixPartners, said: “Now, the significant additional cost pressures could lead to even greater churn, impacting independents, sub-scale businesses, and those with less-than-compelling consumer propositions and weaker brands in particular.

“The moratorium on landlord action also ended at the end of March and, as this expires, it may lead to more closures as landlords seek foreclosure due to unpaid rent. During this extremely challenging time, many businesses will be revisiting liquidity forecasts that may have become out-of-date and reassessing the validity of any capex and new site roll-out plans. Maintaining stability of supply will also be critical, as will be the careful consideration, testing and implementation of strategic pricing options.”