Signs of an economic recovery exist, but when will this boost sales?

Macro economic data is continuing to show improvement in the UK on an almost daily basis, yet is this just temporary or the first stage of a prolonged recovery?

The UK has experienced an extremely severe recession but recent indications from the Purchasing Managers Index in May show that despite aggressive falls in late 2008, UK manufacturing and services are now picking up.

Pubs are now reportedly closing at a rate of around 50 a week, a number that has continued to increase. While this would suggest that the sector is not benefiting from any green shoots yet, trade data from Nielsen for 11 managed operators suggests that on-trade beer volumes rose by 2.8 per cent in April year-on-year.

However, the same month in 2008 saw volumes fall by 16.6 per cent and there was no Easter in April last year, so this is starting from a reasonably low base. And managed operators are really putting the value offers out there, arguably taking trade away from the tenanted operations, meaning overall trade is probably still down.

So a mixed bag at present. But what economic indicators should publicans follow most closely to understand where the economic winds are blowing? The simple answer is house prices and unemployment.

House price indices are starting to show improvements, but they are still weak, just not as weak as they previously were. Mortgage lending was up by 16 per cent in April but still some 28 per cent below the figures for the same month last year according to the Council of Mortgage Lenders, and the Bank of England offered a wake-up call recently when it said one in 10 homeowners has a home worth less than the value of its mortgage. Negative equity hits household spending. And when interest rates begin to rise again we could see another fall in discretionary spending.

However, more crucial is unemployment. This currently stands at more than two million and is likely to peak at around three million next year. The people who fear being part of the million or so yet to be made unemployed will not spend in the same way they did pre-recession; until people go back to feeling secure in their jobs discretionary spending will suffer markedly.

And remember unemployment almost always lags behind in a recovery, with the number of jobless often one of the last figures to improve when the economy turns the corner.

Many people I speak to, both in the licensed trade and beyond, have in recent months stepped into a pub filled to the rafters with customers and thought, 'what recession?' I know several establishments that seem almost recession-proof, although footfall isn't necessarily translating into like-for-like sales.

As has been mentioned in this column previously there are no great industry secrets; operators need to concentrate on offering a good product, good service and a reason to come to the pub despite, or in some cases because of, what is going on in the economy around them. They also need to remain realistic, even somewhat pessimistic, in their forecasting to weather the current storm, a case of hoping for the best and planning for the worst.

So is there light at the end of the tunnel, or is it simply an oncoming train? Consumer confidence is king in the licensed trade so the correlation between slowing unemployment growth, stabilising house prices and slowing pub closures is very important.

Those of us committed to the industry can take some cheer from the CBI revising their estimates of total unemployment downwards recently, while three or four more months of positive data is likely to have a marked affect on consumer confidence. For the licensed trade at least, it seems this autumn could well bring an early spring.

Bianca Dexter-Burnell is head of Licensed Trade, Barclays Commercial Bank​