One of the biggest concerns for investors looking to support the sector is the risk of continued local lockdowns, and the impact they could have on business recovery, AlixPartners MD Graeme Smith has said.

Speaking at MCA’s The Conversation, Smith, who’s consultancy firm recently handled the sale of Casual Dining Group to Epiris, said whilst there is “a lot of confidence” in the long-term prospects of the sector, the sudden nature of local lockdowns are a clear risk-factor for potential investors.

“They are concerned about the bumpy nature of recovery if there are these local lockdowns which can be implemented at relatively short notice, because that makes them, operationally, very challenging to deal with,” he said.

And while investors are aware that lockdowns are an issue beyond operator control, “what they really want to understand when talking to businesses and management teams is, practically, how they would deal with it.

“How would the business react? What are its levers in order to reduce costs in line with reduced revenues?

“People are anticipating that there will be these further local lockdowns,” he said. “And so they just want to understand what flexibility businesses have to weather that and make it through to the other side.”

A big part of that flexibility, Smith explained, comes down to the ability of operators to negotiation a rent model with landlords that could cater for spells of enforced closure, leading to a push for turnover-based rental costs.

“A lot of the discussions that have been ongoing with landlords in the lease part of the market have centred on the ability for tenants to have flexibility through the recovery period,” he said. “If the lockdowns are implemented, what can happen to the rent during that time?”

As the head of Manchester-based pubco J.W Lees, Smith’s co-panellist William Lees-Jones shed some light on the extent of the operational challenges for businesses faced with a last-minute local lockdown.

Although pubs in the city weren’t ordered to close last weekend, the Manchester local lockdown did reintroduce other measures, such as members of the public being unable to meet others outside their household, that inevitably affected trade.

Suddenly faced with the new restrictions, Lees explained, “on a busy Friday afternoon, we had to phone everybody that had a reservation for the weekend, and basically ruin their weekend.”

“Bear in mind this was last Friday, when we were getting ready to open our Welsh pubs inside from Monday. Juggling the different rules in different areas was a huge challenge.”

And beyond the difficulties from a business perspective, he added, every local lockdown takes a considerable toll on consumer confidence as well.

“The longer the pubs are open, the greater the confidence the customer has to come back to them,” he said. “And that is why we’ve got to do everything that we can as a trade to not have a second lockdown.

“I really feel for those people operating in Leicester and Aberdeen who, again, have been given very little notice to shut down their businesses.

“It broke my heart to see all of our pubs closing, and so to reopen them has been nothing short of amazing. But we need to keep that building.”