Is it “Freedom Day” in England for pubs and bars?

The intention was to remove all remaining restrictions around indoor trading for hospitality in June, including the requirement for social distancing, limits on capacity, QR code scanning and the wearing of face masks. However it has become increasingly apparent that the reality of Freedom Day will be somewhat more opaque.

While the legal restrictions imposed by the “Health Protection (Coronavirus, Restrictions)” legislation will fall away, the Government has been toning down its messaging as July passed, stressing the need for individuals to remain vigilant and to take responsibility for their own conduct, weighing up the Covid risks for themselves. Meanwhile in guidance released on 14th July the Government encouraged pubs and nightclubs to check vaccine and testing status as a condition of entry via the NHS App. So where does this leave pub and bar operators?

Among the first to transmit messaging were Youngs and Oakman Inns. Young’s, operator of 210 managed pubs in a London-focussed estate, intends to be flexible in its approach, leaving mask-wearing up to staff and customers, bringing back service at the bar but retaining the option of table service and use of its popular self-ordering app.

Oakman Inns with 35 food-focussed premium pubs announced that their pubs would continue with table service only and eschew the customer’s possible desire to charge back to the bar counter. Masks meanwhile will be left as a matter for personal choice by both operators, and this is likely to be the case across the industry. On the issue of checking customers for “vaccine passports”, both have unsurprisingly declined to take up the Government’s suggestion that this would be an advisable precaution.

Implementing every such protocol has a direct impact on the bottom line profit for a pub, and there have already been a slew of factors coming the way of the operators – from increasing staffing levels, enhanced cleaning regimes, to the loss of the most profitable market segment – that of “vertical drinking”, enjoying a drink stood in the bar. Meanwhile staff salaries and hourly wage costs rise along with inflationary impact on many other cost lines. While the Government’s support to the industry has been unexpectedly strong, and all the more welcome given previous experience, the furlough scheme ends in September, as does the VAT cut to 5% on non-alcoholic sales, albeit with a step through 12.5% until next April, and business rates reliefs are tapering out too. As businesses are gradually exposed to full market forces again, they will rely not only on their new found “freedom”, but also on the appetite of the public to throw themselves back into hospitality venues with the same gusto as before.

Changing trends

Some supply and demand trends in the sector have been accelerated by the pandemic. The increasing shift towards outside drinking and dining, which started with the smoking ban and was driven further by the burgeoning street food markets and rooftop bar phenomenon, has gained further traction. Driven outside by necessity of Government edict, some customers may be keen to continue to enjoy their pub experience al-fresco. Likewise, some may struggle to be weaned off the luxury of table service. The implications will help shape the configuration of the pubs and bars of tomorrow.

With 8% of the 106,000 licensed premises having been reported by CGA to have closed in the last 12 months, the field of competition for those remaining may look a little clearer. Meanwhile, acquisition opportunities have been exploited in large corporate deals such as Punch Pubs’ £53m acquisition of Young’s tenanted estate, and as seen in the organic expansion planned by the likes of Loungers and Wetherspoon.

For some operators, nightclubs being the obvious example, this is the first opportunity to return to their core business since March 2020. Venues have been humming with activity over the last 8 weeks as club spaces are re-commissioned to prepare for an eager young public. While operators have faced massive headwinds, some such as Rekom and Dirty Martini are alive to opportunities for new acquisitions. However with case numbers continuing on a steep upward trajectory and the NHS track and trace app incarcerating customers and staff alike in quarantine may seem to many like another false dawn.

Conclusion

Where does this leave the country’s pubs and bars? In the short term the winners and losers are likely to look a lot like they did last summer. With a stay-cationing boom, rural and tourist-focussed pubs are set for a busy and rewarding few months, those pubs and bars in more urban locations away from the influence of the tourist pound are likely to be nervously casting their eyes on the race between the vaccine roll-out and the voracious Delta variant.