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Parts of pub sector starting to exit recession, PWC says

07 August 2012 by
Parts of pub sector starting to exit recession, PWC says

Parts of the pub sector may be starting to come out of the recession, as insolvencies among pub and restaurant businesses fell in the second quarter of last year, compared to 2011.

That was one of the findings from accountancy firm Pricewaterhouse Coopers (PWC) which warned that hospitality and leisure is still one of the economy's worst-affected sectors.

A total of 332 hospitality and leisure companies became insolvent in the second quarter of 2012, a drop of 22% on the first quarter of 2012 when there were 428.

PWC said that insolvencies had now fallen back to the levels seen in the first half of 2011, driven by a decline in insolvencies for pubs and restaurants. However restaurants were still the worst hit in the second quarter of 2012, with 159 businesses becoming insolvent.

London saw the highest number of restaurant insolvencies in quarter two 2012, when compared to other regions, at 56, although the relative strength of London's economy means that it can support more restaurant businesses in the first place. London alone has seen 432 restaurant insolvencies since quarter three 2010.

Looking ahead at the pub and restaurant sector, Robert Milburn, hospitality & leisure leader at PWC, said: "Eating out has become a key lifestyle activity for many consumers, thanks to increasing availability and choice, particularly in the casual dining segment. We see continued long-term development in the sector, with opportunities emerging from the development and roll out of new concepts.

"The pubs and clubs segment is in a phase of transition. Although hit hard by the combination of recession, smoking ban and competition from ‘drinking-in', parts of the pub sector are coming out of recession, having been first in, and there are good stories as a consequence of closures taking out some over-capacity and pub groups restructuring and consolidating.

"We are seeing evidence of the effects of the slowdown in consumer spending and there must be a concern that those pubs which try to differentiate purely on price are going to end up in a price war, which will have losers."

He added: "Only time will tell if H&L insolvencies reached their peak in the first quarter of 2012 and are now on the decline, but recessionary pressures on leisure spend are certainly expected to continue over the next 12 months. This limited spending is likely to focus around those leisure activities with an element of treat and experience. However, despite cyclical pressures, leisure remains a key component of consumer spending."

By Neil Gerrard

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