Poor festive trading results in £3b hit to hospitality sector

A 40% drop in sales for the hospitality sector during the 2021 festive season versus 2019 represents a £3b hit to the industry, according to data from UKHospitality and CGA.

Sales in pubs, restaurants and bars were down 60% on Christmas Day, 31% on Boxing Day and 27% on New Year’s Eve, compared to 2019, during what would traditionally be a bumper sales period for thousands of hospitality businesses.

The depressed figures captured by UKHospitality and insight consultancy CGA suggested a ‘lost Christmas’ and a lost chance to rebuild crucial cash reserves in the sector, delaying its recovery and leaving many businesses exposed going into the fallow winter months.

Venues in Scotland and Wales were hit even worse in the week leading up to New Year, where more stringent restrictions were in place. The sector in Wales performed twice as badly as England, and in Scotland 2.5 times worse, in the week ending 1 January 2022.

The findings showed how the industry’s fight to recover from the pandemic has been severely hampered by Omicron. In the weeks prior to the new variant emerging, average sales had been recovering steadily through the autumn and were close to pre-pandemic levels (98%).

UKHospitality chief executive Kate Nicholls said: “December is a vital period for hospitality businesses, equal to three months’ worth of trading for many. These new figures are crippling for an industry already struggling but also spell disaster for the wider UK economic recovery, as Office for National Statistics figures showed that overall growth in Q3 was driven by hospitality.

“These sales drops versus 2019, and also against our members’ projections before the onset of the new Omicron variant, will have taken most businesses from healthy trading for the month to painful losses, delaying the sector’s recovery and extending hospitality’s long Covid. Cash reserves are severely depleted, and some businesses will struggle to survive the first quarter of 2022.

“This dreadfully disappointing December has further stymied our ability to deliver jobs, growth and investment at pace, which we all know is so crucial to the recovery of our economy overall.”

Companies operating groups or chains of pubs or restaurants fared slightly better than independents, according to data analysed from the CGA Managed Volume Pool. These venues, which are typically larger and better invested, saw sales fall a third in the week up to Christmas and by around a fifth in the week up to New Year.

Hospitality is facing significant headwinds in 2022, compounding a challenging outlook for thousands of businesses and millions of workers. Sector businesses face a cliff edge in April when VAT is set to return to 20%, plus a rise in business rates and labour costs, on top of soaring energy costs, the growing cost of food and drink and an end to the rent moratorium.

Nicholls added: “A pivotal moment for the recovery is approaching. As recent quarterly GDP figures show, the hospitality sector can play a leading role in driving the recovery. Crucial to this is the right support and keeping VAT at 12.5% will enable the sector to safeguard jobs and crucially, it will help keep down costs for our guests amid some very strong inflationary pressures. Reducing rates bills in 2022/23 will also be important in enabling businesses to recover again.”

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