Pubs urged to keep cost controls tight

Pubs and restaurants must not ease up on the tight cost controls imposed — even if they see an upturn in the run-up to Christmas.

The warning comes from market analyst Peter Backman of Horizons who said operators must continue to negotiate good deals from their suppliers, put more cost-effective dishes on menus, ensure they aren't over-staffed, and that food wastage is kept to a minimum.

"There has been much talk of green shoots in the industry, but operators should treat this as the downturn levelling off, rather than trade improving," he said.

"Consumers are likely to remain cautious with their spending but if the economy improves we could see confidence returning and restaurant spend rising, particularly as Christmas approaches."

Backman believes businesses should take a longer-term view of the economy, remaining restrained when it comes to corporate entertaining and staff Christmas parties. "Restaurant operators shouldn't rely on an increase from corporate spend over the next few months, as companies will still be reluctant to spend money on entertaining, particularly if they are also making redundancies."

He added that food prices are likely to to rise in the future due to the growing world population and pressure on demand from rising wealth in developing markets.

"While food prices are currently stable and in the short-term might even fall slightly, long-term the economic indicators are that prices will increase again.

"Restaurateurs face further pressure in January when VAT returns to 17.5%. This will impose an increase of 2.1% across the board of VATable items, including meals eaten out, but not most supermarket food.

"This will widen the value gap between eating out and eating at home. Foodservice operators will no doubt take action, including absorbing some or all of the increase if they can."