Market Confidence Dips, But Bigger Groups More Optimistic About Survival

Fewer than 10% of business leaders in the out-of-home sector are confident about market prospects over the next 12 months, the latest Business Confidence Survey from CGA and Fourth reveals—but restaurant and pub group bosses are less pessimistic than independent operators.

The survey, conducted over the first three weeks of September, shows that the number of leaders feeling confident about the general market has dipped to just 9%—half the level in June (16%), and a fraction of the four-year high of 60% at the start of this year.

But the proportion of multi-site businesses feeling confident about the next 12 months for their own business has climbed five percentage points to 37% since June. This contrasts with a recent survey of members of UKHospitality, BBPA and BII, which found that only 19% of operators with one or two sites felt optimistic about their prospects. However, group leaders’ optimism levels remain way below pre-pandemic levels of 83% in the February edition of the Business Confidence Survey.

The gulf in confidence follows news from CGA’s Market Recovery Monitor with AlixPartners that 89% of group managed licensed premises were back trading by the end of August, compared to just 68% of independently run sites.

Confidence has been lifted by the popularity of the Eat Out to Help Out scheme, which led to better than forecast trading for many multi-site groups in August. Two thirds of leaders said their trading had been above expectations since they reopened, with only 18% reporting worse than expected sales. Staycations and warm weather also boosted many operators over August.

But optimism levels will have been dented by new measures on group sizes, curfews and table service since the survey was conducted. Nine in ten leaders think fragile consumer confidence will have a negative impact on the market, and nearly as many (79%) are concerned about a squeeze on disposable incomes.

The Business Confidence Survey also shows how leaders are responding to market dynamics and consumers’ changing habits. More than four in five leaders (83%) say they will be avoiding city centre locations in their growth plans following a collapse in footfall in big cities including London, while three quarters (73%) plan to adapt to the widespread switch to working from home.

CGA’s Research & Insight Director Charlie Mitchell said: “The last six months have been the most challenging that the out-of-home eating and drinking sector has ever known, and the government’s latest restrictions mean conditions are likely to remain very tough for the rest of 2020. The Eat Out to Help scheme has been a springboard to recovery for some multi-site groups, and the green shoots of confidence among leaders are very welcome, but it is clear that many independents face a battle for survival.

“In the face of so many headwinds, the fresh backing that was announced this week on jobs, loans and VAT is welcome, though whether it goes far enough remains to be seen. This is a resilient and adaptable sector, but it deserves extended support from government if it is to sustain businesses and protect jobs in the coming months.”

Sebastien Sepierre, Managing Director – EMEA, Fourth, said: “The wider COVID-19 narrative across the nation has taken an unfortunate turn in recent weeks, with the government introducing further restrictive measures on our industry. Naturally, this will have a less than positive impact on the confidence of business leaders across the sector. As an industry, we have clearly demonstrated that, by harnessing the power of technology and operations, we can operate safely and responsibly to deliver the customer experience that consumers were pining for during lockdown. It’s imperative that we work collaboratively to preserve confidence within the safety of eating and drinking out of home, as we navigate the challenging months ahead.”