The enthusiasm and optimism that has washed through the UK pub, restaurant and bar industry over the past five years or so are in pretty short supply at the start of this New Year.

Confidence took a major battering across most of the sector in 2002, leaving operators generally more uncertain about the future than for many a year – even accounting for the September 11 fall-out this time last year.

An ever competitive high street, licensing law reform, even signs that the perpetually-expanding eating out market may be having a few difficulties, with McDonald's and Burger King's global problems casting a shadow over the quick service sector – they all pose tricky challenges for 2003. That's not to mention the general economic nervousness.

The year also starts with a few hangovers from the preceding 12 months – buy-out and takeover intrigues at PizzaExpress, Signature and Chez Gerard and the still unresolved future of the financially-embarrassed SFI.

One prediction is easy. There will be plenty of deals done in 2003 as the sector goes through some significant tidying up. It has already started with Punch's purchase of Conquest Inns. SixC's planned demerger around Easter-time will be but one highlight in what promises to be a pyrotechnic year.

But away from the deals - which is an area that has probably consumed the sector far too much in recent times - the biggest challenge to all parts of the market this year must be licensing reform.

It is now a very real issue, with the Licensing Bill already in its preliminary stages in Parliament. There are times, however, when it seems that operators have yet to fully engage in the process and its implications, apart from rehearsing the well-worn and increasingly sterile magistrates-versus-councils debate.

Change is coming and councils will run the resultant structure. Some may still want to derail, but for the rest the time now is for some active engagement – first with the Government, and second with local authorities themselves.

The Labour Government, despite its controlling, paternalistic and slightly puritan tendencies, is about the best friend the industry has. Licensing minister Kim Howells is increasingly recognised by those that have come close to the Department of Culture, Media and Sport as a man to do business with.

Central Government is the key to winning the centralised guidelines required to provide any modicum of certainty in licensing issues going forward, and is the only power that can effectively take on rogue councils such as Westminster City, which is simply at odds with Government's approach to licensing as set out in the Bill.

It may also be time to show a hand of understanding and assistance to local councils across the country. Surprise is always a good tactic.

It is always going to be difficult to get local authorities to understand the needs of business. Unlike national Government, they don't depend directly on business tax revenues – only indirectly. Dialogue can always help, though.

"Thinking globally and acting locally" – to borrow a great marketing one-liner – may be a good motto for the sector this coming year, if it hasn't been adopted already.

Enthusiasm, optimism and confidence may be lacking in 2003, but they can perhaps be profitably replaced by a large dose of pragmatism.