‘Storm clouds are gathering' Luke Johnson warns
Speaking at the Casual Dining Show in London earlier today, Johnson said that the outlook for the wider economy, and not just the foodservice sector where he holds several investments, had started to look more gloomy over the past half year.
"I think storm clouds are gathering in the sense that across lots of businesses that I am involved with, not necessarily foodservice, I am seeing some worrying times. I am talking literally the last three to six months," he said.
"The Bank of England has already lowered the growth expectations for this year. I fear they might lower them again and if you look at sectors from commodities to property to banking to energy, it is clear that quite a few parts of the world are in or close to recession. Quite large sectors of the overall industrial mix are struggling. The stock market is often a leading indicator so I am less bullish than I was six months ago."
Johnson is chairman and part-owner of Patisserie Holdings, as well as Bread Ltd (the firm behind Gail's Artisan Bakery). He is also chairman of Eclectic Bars, chairman and part-owner of Feng Sushi, casual-dining chain 3Sixty Restaurants and contract catering firm Genuine Dining. In addition, he is chairman and part-owner of pub group the Draft House, and chairman and co-owner of London bar chain Grand Union.
However it was not in those specific businesses where he saw the warning signs emerging, he said.
"As it happens most of my prominent investments in the [foodservice] sector are fine," he noted.
"You just look at an index they use in the stock market - profit warnings versus upgrades and that is flashing red, and I think that 2016 is not going to be as good as I would have hoped it was. Some of this is gut instinct. You could say that in valuation terms and lots of others that this is a very toppy sector. There is a sort of assumption across all of us - and we are all sort of to blame for this - that growth will continue inexorably and that people will forever eat out more and spend more etc. I have been one proselytising that mantra as much as anyone. If I were a betting man I would now say that we are headed into tougher times."
Nonetheless, Johnson said he still had an appetite to make more investments in the sector. "But now is not the time to be signing the really crazy rental deals and to take on very high levels of leverage and to be somewhat more thoughtful about one's expansion plans. Long term I do believe in the growth of the West, of Britain and of the foodservice market. In the long run, societies get richer and they eat out more and that is what we rely upon and I think that still holds true, but I think there are cyclical upturns and downturns."
When asked about his position on whether or not Britain should remain in the European Union or leave it, ahead of the EU referendum scheduled for 23 June this year, he indicated that in the long term he thought leaving could be beneficial to the country and the industry.
"I think very short term not much will change except for things like currencies. In the medium-term there may be some challenges about making use of the immigrant workforce - the availability of migrant labour might become more of an issue. I think longer term, regaining full control of our own democracy and sovereignty is very important. It means we can kick out those politicians whose laws we don't like, whereas it is impossible for us to kick out the European Commission who frankly pass most of the laws that are imposed on us so I think long term a reduction in regulation and taxation should be good news and I think being able to take control over our own government is the priority. Long-term as the fifth-largest economy in the world I think we will be better off."
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