The experts can't agree what the future holds. Illustration: Paul Bommer
The experts can’t agree what the future holds — but at least restaurants are holding their own for now
Such is the din of confusion that surrounds the economy, I have been asked to mull the musings of those in the know — both positive and negative — considering the likely outlook for the business of restaurants.
Safe to say, there is something for everyone in the patchwork of differing predictions. Broadly, the world is split into two camps: those who think we are bumping along the bottom before we creep out of recession at the end of this year, and those who believe we are perched on a half-time ledge, part-way through another jump down — dubbed a double-dip recession. Those in the happy camp include Gordon Brown, Alistair Darling, and the Confederation of British Industry, which have all suggested the recession will be in the rear-view mirror by Christmas.
But not everyone is convinced. Many think we’re going to be paying for the excesses of the past few years for sometime yet. One analyst recently told me: “Every Labour government more or less bankrupts the economy, and this is what we are seeing now. The medicine is going to be quite horrible — higher taxes, higher unemployment, especially in the public sector, and a pensions time bomb.”
Unlike analysts, restaurant operators are generally a positive bunch, but even they seem very cautious.
Adam Fowle, the chief executive of Britain’s biggest pub and restaurant business, Mitchells & Butlers — which operates 2,000 venues — told me: “What we are seeing now — consumer confidence and expenditure levels flat or improving — is not what we are expecting to see next year, when we have the VAT increase in January, growing unemployment and a general election. At least two of those three things will impact consumer spending negatively.”
The general election is hugely significant because whoever emerges to run the country — presumably Dave & Co — will have to get serious about addressing the state of Britain’s finances. And that means higher taxes and less public spending.
The amount of money that needs to be saved from the public coffers annually was recently put at £100bn. It’s an almost incomprehensibly large number — the equivalent of four million salaries at
£25,000 a year. Putting the higher rate of income tax up from 40 per cent to 50 per cent would raise £2bn — one-fiftieth of the amount required.
So far, so depressing? It’s important to remember that what we’re experiencing is nowhere near as cataclysmic as everyone thought it would be. Lower mortgage costs mean that most consumers have been insulated — and higher taxes next year probably means that interest rates will have to stay low for a long time yet. So called “staycationers” — people holidaying in the UK — have helped leisure businesses such as restaurants, and Britain, particularly London, has reportedly been awash with tourists from overseas too, driven here by the weak pound. Cost pressures are also easing for operators.
A fundamental fillip is that eating out has proved resilient. While the sector is clearly under pressure — with volumes down — it is not a habit people have given up easily. Like the affordable treats of chocolate and lipstick (sales of both tend to rise in recession), it seems people need the comfort food of eating out. The key problem is nobody really knows what is going to happen. Confusion reigns. And if you’re not confused you really haven’t been paying attention.
Mark Stretton is editor of M&C Report
