United Kingdom

Spending data reveals pub and restaurant spending recovered in July

Spending in pubs and restaurants remains below pre-coronavirus levels but recovered throughout July, with the latest data suggesting consumers are willing to return to their pre-Covid spending ways.

Figures from Barclaycard, which processes around £1 in every £3 spent in the UK, said spending in pubs in the last week of July was down 9.4 per cent on the same week in 2019, and down 16.4 per cent in restaurants.

While these figures demonstrate that spending has not yet returned to normal levels, the figures are reveal a surprisingly resilient consumer economy.

Spending and bars, pubs and restaurants gradually recovered throughout July, figures suggest, even if consumer spending remains below normal levels

Compared to the first full week that pubs and restaurants were allowed to reopen, 6 – 12 July, spending in pubs was up by 49.2 per cent and up by 23.2 per cent in restaurants.

Kate Nicholls, the chief executive of trade association UK Hospitality, called the figures 'a positive first step on the road to recovery for those ventures that can reopen'.

She told This is Money: 'There are some positive, green shoots of recovery here. It's nice to see spend in venues bouncing back after a pretty torrid few months. We mustn't think we are out of the woods, though, and many businesses have not reopened.'  

And the British Beer and Pub Association warned this week more than one-third of pubs in the UK cannot break even one month after reopening.

UK Hospitality chief executive Kate Nicholls: 'It's nice to see spend in venues bouncing back after a pretty torrid few months'

Large swathes of the hospitality industry were handed a 15 per cent cut in the rate of VAT by Chancellor Rishi Sunak on 15 July, while restaurants will also be hoping the Government's 'Eat Out to Help Out' discount scheme brings out more customers after pubs and restaurants were required to shut their doors in March. 

Businesses are keen to make the most of the good weather and pent-up demand and outperform last year's sales figures. If Covid cases spike as summer turns to autumn and the weather gets worse, and the Government is forced to choose between opening pubs and opening schools, their fortunes could reverse dramatically. 

England's children's commissioner Anne Longfield said Wednesday that 'If the choice has to be made in a local area about whether to keep pubs or schools open, then schools must always take priority.'

Consumer spending appears to be rebounding, if slowly

Figures reported last month by This is Money revealed spending in pubs and restaurants remained far below normal levels over the so-called 'Super Saturday' weekend, despite pictures of packed crowds in certain parts of the country.

Britain's biggest bank Lloyds found pub spending was 65 per cent down on pre-coronavirus levels seen in February and restaurant spending 55 per cent, while Barclaycard said spending across hospitality, leisure and entertainment was lower than the same July weekend in 2019.

But the new figures suggest spending did gradually recover throughout July.

Bars, pubs and restaurants were allowed to reopen on 4 July

Barclaycard's Rob Cameron said consumers were 'becoming more confident with pre-lockdown activities' and that, 'while some sectors are still waiting to see an uptick in volumes, there is positive momentum and the spending trends we've seen over the past month will bring hope to a number of UK businesses.'

Separate analysis from the data provider CGA found a similar trend. 

Figures based off sales data from 50 companies including Greene King, Pizza Express and The Restaurant Group found sales were down 28.5 per cent year-on-year in the week of 20 July, a better performance than the nearly 40 per cent slump seen in the first week after lockdown was eased at the start of the month.

Consumers will benefit from a 50% Government discount of up to £10 a head on food and non-alcholic drinks from Monday to Wednesday in August

Sales were up 36.8 per cent on the week before, with nearly seven in 10 bars, pubs and restaurants open for business.

CGA's Karl Chessell said the improvement was 'more steady than sensational', and restaurant chains in particular were 'taking it cautiously as demand edges up'.

He added: 'What will be interesting to see in the next few weeks will be the impact of the cut in VAT, the 'Eat Out to Help Out' campaign and also the holiday season, now that more people are expected to stay in Britain.'

A 'v-shaped' recovery?

Bank of England chief economist Andy Haldane told the Treasury Select Committee in July that Britain appeared to be on track for a 'v-shaped' recovery after the coronavirus shock

With GDP figures and other economic data published months after the fact and the fast-moving changes to lockdown rules, officials have been poring over so-called fast indicators like footfall surveys and credit card and payment processing data to determine whether the UK is primed for a 'v-shaped' coronavirus recovery.

The UK's service sector expanded at the fastest rate in five years last month as lockdown measures continued to be eased, with IHS Markit/CIPS Services purchasing managers' index rising to 56.5 last month, up from 47.1 in June.

The Bank of England's chief economist Andy Haldane told the Treasury Select Committee last month that 'roughly half' of the economic slump seen in March and April had since been clawed back, describing the recovery as 'a pretty sharp one'.

He said: 'So far it has been a V'.

Other ratesetters have disagreed, and the Bank's monetary policy committee this week said it expected Britain's economic recovery to be slower, even if it believed the initial damage caused by the coronavirus was less severe than previously predicted in May. 

Simon French, chief economist at investment bank Panmure Gordon, also sounded a more cautious note on the figures.

He said: 'The first half of the rebound has happened, but you need the second half to make a V. That's the problem with social distancing, the last 10 – 15 per cent is far harder than the first 10 – 15 per cent.'

He added: 'A decent recovery so far misses three things. The worst is still to come as the furlough scheme is unwound; fears over a second spike have grown so you would expect a stalling despite the summer holidays; and quite a lot of this is pent up demand that will fizzle as that enthusiasm wanes.

'Don't get me wrong things are improving, but to get back to levels seen at the end of 2019 it's going to be a long old road.'

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