Restaurant openings continue to make up for the fall in licensed premises caused by pub closures across Britain—but the pace of expansion is easing.
Those are among the headline findings from the latest Market Growth Monitor, the definitive survey of Britain’s restaurant, pub and bar supply from AlixPartners and CGA Peach.
The Monitor’s data from CGA’s Outlet Index shows that Britain’s number of drink-led licensed premises fell by 1.2% in the year to December 2015—equivalent to 808 sites. But the number of food-led premises rose by 1.6% over the same period, thanks largely to the roll-out of casual dining operators around the country. The net result is that Britain had just over 124,000 licensed premises in December, up by 0.1% on the same point a year earlier.
After years of steady decline driven by the closure of drink-led pubs, the figures show that restaurants have restored the licensed trade to expansion mode. But overall growth of 0.1% is significantly lower than the totals revealed in the previous two editions of the Market Growth Monitor. This indicates that the pace of restaurant openings is slowing down, due in part to fragile consumer confidence and to the availability and costs of property.
The findings on supply echo similarly modest trends in sales over the last year. The Coffer Peach Business Tracker measured 1.5% growth for managed pub and restaurant businesses in 2015, well down on the 2014 figure of 2.8%. It has prompted speculation that although many casual dining chains continue to expand, restaurant supply might soon start to outstrip demand in some places.
Other findings from the third edition of the Market Growth Monitor include:
• Growth in restaurant openings remains reasonably even across Britain, with all major regions increasing their supply of dry-led licensed premises in the year to December 2015. Growth was fastest in the north east and Wales, at 2.9% each
• Pub closures may be starting to bottom out. The 1.2% decline in drink-led premises in the last year represents a notable slowdown in the context of a 12.6% fall over the last five years
• Scotland increased its supply of licensed premises by 0.8% in the year to December—suggesting that the impact of the tightening of drink-drive limits might be lower than feared
• Growth in openings of licensed premises in London was lower than the national average at 0.4%, reflecting suggestions that the market in the capital may be over-heating.
CGA Peach vice president Peter Martin said: “The casual dining sector remains buoyant, with established names rolling out and a steady flow of new concepts arriving to keep them on their toes. But with the pace of openings slowing, our latest Market Growth Monitor will give pause for thought to anyone who thinks the boom will last forever. Competition for market share is fiercer than ever, and the risk of saturation is likely to be an increasingly pressing issue this year.”
AlixPartners managing director Paul Hemming said: “While the MGM data shows a slowing of new openings, it’s important to remember this is a net figure. It does not capture the ebb and flow of existing sites changing hands between operators, and the on-going march of the multi-site branded operators taking market share from independents.
“That said, it is inevitable that site expansion will at some point slow, especially against the fierce expansion rate of recent times. It is becoming increasingly hard to find good sites at economic rents. With the backdrop of wage inflation, it’s is also difficult for operators to improve their operating margins, so many will just have to accept a lower return on capital as they grow.”
The AlixPartners and CGA Peach Market Growth Monitor is compiled quarterly from data supplied by CGA’s Outlet Index, a continually updated database of all licensed premises. For more information, contact CGA Peach account director Jamie Campbell at jamie.campbell@cgapeach.co.uk.
The Monitor is delivered in partnershipwith AlixPartners, the leading global financial advisory firm. Contact managing director Paul Hemming at phemming@alixpartners.com.
