Growth predictions tinged with caution

by Christina Golding

THE restaurant sector is set for two years of strong growth but economic pressures will stall long-term prospects, says a new report.

The value of the UK's restaurant business is set to rise by 6.2% from £13.3b in 1998 to £14.1b by next year.

But, according to research by analysts Key Note, the growth will begin to slow in 2000 to a 4% annual rise, dropping to 3% by 2002.

In recent months consumers have benefited from a relatively low inflation rate, improvements in the labour market and a gradual increase in personal disposable income (PDI).

But more modest increases in PDI coupled with inflation that is forecast to rise at a faster rate than in the past few years will limit the amount spent on eating out, says the report.

At the same time, changes in the population indicate a drop of about 21% in 16- to 29-year-olds, a core target group for many restaurants.

Signs that the themed market may be reaching saturation point, price discounting among competing chains and the minimum wage legislation were also expected to threaten growth.

But despite the spread of branded chains, the report found that the majority of restaurants are still run by small independent operators, some 86% of which had an annual turnover of less than £250,000.

Key Note's 1998 Market Report Plus on Restaurants costs £335. Tel: 0181-481 8750.