Number of outlets grows but Budget threatens confidence

Data from CGA by NIQ and AlixPartners’ latest Hospitality Market Monitor showed a 0.7% rise in outlets between July and September 2024—equivalent to 661 net new openings, or seven per day.

It followed 0.5% growth in the second quarter of the year, which was the first positive quarter-on-quarter movement since mid-2022 and brings Britain’s total sites to 99,868—virtually level with the figure 12 months ago.
However, confidence for continued growth has been stifled by the Government's autumn Budget, which the report stated had added to hospitality's “heavy burden of costs”.
The measures, including a rise in the National Living Wage and Employer National Insurance Costs, sparked industry-wide concerns for growth and fears of further business closures across the hospitality market.

Industry leaders also suggested the Budget will compromise profitability, investment and cashflow across the sector.

CGA by NIQ business unit director for hospitality operators and food, EMEA, Karl Chessell, said: “Two successive quarters of growth in site numbers is an encouraging sign of hospitality’s strength in the face of major challenges.

Extra costs

“While the sector is smaller in outlet terms than before Covid, the past six months have shown hospitality groups, investors and entrepreneurs have been confident enough to be opening rather than retrenching.

“With inflation, GDP and other economic indicators moving in the right directions, the sector should be looking forward to 2025 with guarded optimism.

“However, with substantial extra costs on labour and rates now looming, there is a real danger that hospitality’s momentum will be lost.”

Recovery is particularly “fragile” for the independent sector in the wake of the pandemic and high inflation, with the segment 15.9% smaller than it was in March 2020, the report added.

Despite having been in growth for two quarters in a row, after contracting every quarter for the past four years, rising costs across the board now put the revival of small businesses in doubt, CGA stated.
The monitor also showed there were 12% fewer community pubs than there were before the pandemic. However, this rose by 0.4% between June and September.

The high street pub segment as measured by the Tracker meanwhile was 3.8% larger than three months ago.

Cautious lens

It also highlighted some significant regional variations, with above-average increases noted in London and Scotland.
AlixPartners’ managing director Graeme Smith said: “In the absence of a Budget that brought the spectre of more challenges for the hospitality sector, these latest findings would have provided some cause for optimism.

“Two successive periods of quarter-on-quarter growth in site numbers—a key proxy for the health of the sector—demonstrates an impressive resilience, and signalled some very welcome stability for the industry.
 
“However, significant challenges remain; the plans set out in the October 2024 Budget mean we must view these latest figures through an extremely cautious lens.

“The hope is the positive momentum of the past six months will not entirely stall, and that the sector will continue to recover.

“There is the hope the increase in the National Living Wage may encourage customers to spend more and businesses should look to benefit from this while it lasts.

“With many businesses now looking to further consolidate their estates, market flux and churn may well create more opportunities for others.”