Operating costs are rising across the licensed trade, according to an annual industry report from the Association of Licensed Multiple Retailers and property specialist Christie & Co.
The 2017 edition of their Benchmarking Report shows operating costs passing the 50% mark for the first time in the survey’s history, with growth across the sector continuing to slow.
Operating costs across all trading styles now stand at 51.5% of turnover, with growth across the entire survey at 1.1%.
However, the report highlights one area on the up, the late-night market, with nightclubs experiencing resurgence with 3.6% growth. Licensed accommodation, the success story of last year’s report, continues to rise, growing at 5.1%.
The ALMR Christie & Co Benchmarking Report benchmarks operating costs, market trends and sector performance and is the most comprehensive study of its kind in licensed hospitality.
The 2017 report reveals that capital expenditure has also returned to the sector and now exceeds the levels observed before the recession. Some of this expenditure is likely to be defensive in nature, although with so many private equity-backed bar, pub and restaurant businesses in the UK, the report points to bigger growth opportunities within the sector.
For the first time the report includes a confidence survey which highlights that there is confidence within the sector, particularly trading prospects for 2017 in both anticipated like-for-like turnover growth and anticipated profitability. The majority of respondents felt Brexit would have little impact to their business in 2017.
ALMR chief executive Kate Nicholls said: “Employers are looking at the political instability and uncertainty caused by Brexit and the possibility of significant cost increases, as wages rise and rates reliefs expire.
“There is a risk that additional costs could hit at a time of great instability hitting eating and drinking out businesses that are crucial to the UK economy and have helped restore prosperity to our town and city centres.
“However, the continuing growth of accommodation in the eating and drinking out market, and the welcome revitalisation of nightclubs, highlights the innovation and dynamism on show in our sector.
“Venues are responding to challenges by adapting and providing customers with new and exciting experiences. It should be remembered though, that this growth could be undermined if the Government does not provide adequate support for businesses and fails to bring about the stability and access to labour that employers are going to need.”
Neil Morgan, managing director for pubs and restaurants at Christie & Co, added: “Despite the well-documented decline in pub numbers over the past three decades we are seeing a more lean and competitive sector emerging as operators diversify and respond to the continuing evolution of the UK consumer landscape.
“There is clearly confidence in the sector, highlighted by the report’s confidence survey and increasing levels of capital expenditure. However, there are a number of political and economic pressures which could threaten some operators, all exacerbated by the uncertainty surrounding the Brexit negotiations.
“What is clear is that operators must prepare for both the challenges and opportunities. Therefore the need for effective business planning is more essential than ever if operators are to not merely weather the storm but seek to thrive in the long term.”
Pictured: The Deltic Group continues to invest in the nightclub sector including Pryzm which opened in Portsmouth in June.