There are grounds for “cautious optimism” for the sector’s prospects in the medium term but there will be “no initial return to the good old days”, a leading economist has told the Future Pub Conference.
Ross Walker, senior UK economist at RBS, said full recovery is unlikely while there’s still a squeeze on consumer spending that’s likely to last another five or six years.
He pointed out that before the downturn of 2008, the performance of the food and beverage (F&B) sector was closely matched with that of the wider services industry. Output in F&B declined at a faster rate than services between 2008 and 2010, but since the end of 2011 has been significantly ahead; at the start of 2013 output by volume in F&B was +6% by volume, against less than 2% in the overall services sector.
Walker said: “I think there are grounds for cautious optimism. As long as economy doesn’t fall back to full blown recession I think pubs and cafes will continue to perform ok.”
However, he emphasised the fact that UK households spent a decade acquiring excessive levels of debt, and it will take a similar period of time to bring debt-to-income ratios back to “sustainable” levels. It peaked at about 165% in 2008 and has been in general decline since then, reaching about 145% at the start of this year.
“The squeezed consumer income has got further to come,” he said.
Meanwhile, public sector deficits are set to persist until 2019, he said, and even this timescale may prove optimistic. Public sector debt went above £1 trillion in December 2011 and will continue to rise as a percentage of GDP until at least 2016, he said.
Walker said there would be “no initial return to the good old days”, although there was a possibility that this could happen by 2020.
He said there’s “no quick fix” to the problems of lack of growth, which will be determined over the long term by productivity. However, Walker said that “some of the headwinds will diminish”.
