We aren't going to the pub...
A round-up of the business news that matters today around the UK...
Thanks for reading Off to Lunch. If you would like to receive all our newsletters by email, attend our forthcoming events and support our work then please subscribe here:
Pubs have recovered slower than expected since the end of Covid-19 restrictions, according to JD Wetherspoon. More specifically, pubs in London, suburban locations and smaller towns. Pubs in other city centres are doing well.
In an interesting statement from Wetherspoons this morning, the pub group said that like-for-like sales over the last 11 weeks were down 0.4 per cent compared to the same period in 2019, before Covid. Wetherspoons warned that it now expects to post a loss of around £30 million for the year to the end of July when the City had been expecting the company to break-even.
Shares in Wetherspoons have fallen more than 10 per cent in trading this morning following the update. As you can see from this graph, Wetherspoons shares have now almost given up the recovery they made after the hit from Covid and are perilously close to where they were in March 2020, when the company was ordered to close all its pubs, which is remarkable really…
Tim Martin, the outspoken chairman of Wetherspoons, is blaming working from home, inflation, and the after-effects of lockdown, specifically a “fear factor” around going out. He told Reuters:
"When pubs were closed people probably got used to staying in. We're probably more inclined to be creatures of habit than we realise.”
Martin also took the opportunity to criticise the government for the tax disparity between pubs and supermarkets on food and drink sales. This includes the fact that supermarkets pay zero VAT on food sales compared to 20 per cent for pubs. Martin said in Wetherspoons’ statement to the stock market today:
“A direct consequence is that pubs' share of beer sales, for example, has dropped from 90 per cent to less than 50 per cent in recent decades.
In fact, supermarkets are far more profitable than pubs - Tesco is probably more profitable than the entire pub industry.
Even so, like Monty Python's Dennis Moore, successive governments have robbed the poor (pubs) and given to the rich (supermarkets).”
Tax on food and drink is a debate for another day, but I wanted to quickly focus on the divergence in performance within Wetherspoons’ products and pubs. While food sales were up 2.1 per cent, spirits up 4.4 per cent and slot machines up 16.6 per cent (this number struck me as particularly bonkers), sales of draught ales, lagers and ciders were down 8 per cent compared to pre-Covid levels.
Furthermore, despite the overall dip in sales, pubs in city centres across the UK are thriving. Sales in Cardiff are up 14.9 per cent compared to pre-Covid, Newcastle 13.8 per cent, Nottingham 9.5 per cent, Glasgow 8.6 per cent, Bristol 8.5 per cent, Coventry 8.3 per cent and Manchester 7 per cent. However, pubs in London, suburban areas and smaller towns are not doing as well. Wetherspoons doesn’t break out the number for London but we can assume it’s bad given the overall drop in sales. This fits with data from the Office for National Statistics that London is lagging the rest of the country in terms of the post-Covid return to the office. But it also suggests the mood among consumers in these cities about their financial outlook is brighter than other places around the UK…
And now for some good news…
Amid the gloomy economic outlook, some reasons for optimism today. Firstly, the UK economy grew by 0.5 per cent in May according to figures from the Office for National Statistics this morning. This is much better than the flat performance forecast by economists and also represents a recovery from the 0.2 per cent drop in April, which has itself been revised up after the ONS initially said the economy contracted by 0.3 per cent that month. The growth in May was boosted by some factors that may not last – such as visits to GP surgeries as Covid-19 persists and people booking holidays through travel agents – but is welcome nonetheless.
Two others things to flag alongside this. PageGroup, the recruitment firm, has reported a 25.5 per cent in profits for the second quarter of 2022 compared to the same period last year, including a record June and a 22.6 per cent rise in the UK. This suggests the jobs market remains robust. Steve Ingham, the chief executive, said:
"Looking forward, we are clearly aware of the heightened degree of macro-economic and political uncertainty that exists globally, particularly with regards to increasing inflation in the majority of the markets in which we operate. We are monitoring all key performance indicators in the business regularly, but to date we have seen no significant changes apart from the usual seasonal movements.”
Finally, while the price of oil is still up over the course of 2022 and is a key driver of the cost of living crisis, it is down more than 20 per cent on the highs it hit in early March and briefly dipped below $100-a-barrel yesterday. This is how the graph of the Brent crude price now looks for 2022…
Other stories that matter…
The Competition and Markets Authority is investigating BT, ITV, Sky and production company IMG over how they purchase freelance services to make live sports programmes in the UK. The investigation appears to be about whether there is price-fixing on the rate paid to the cameramen and other technicians involved in the broadcast. The companies involved say are co-operating with the investigation. The CMA statement is here.
The CMA is also investigating Morrisons purchase of McColl’s stores, which Off to Lunch said might happen. This is a tricky situation because up to 16,000 jobs and 1,160 shops were at risk before the deal, with convenience store chain McColl’s facing collapse. However, the deal undoubtedly gives Morrisons a foothold in neighbourhoods across the UK and Tesco’s £530 million purchase of One Stop in 2003, a similar deal to this, accelerated the supermarket chain’s expansion into convenience stores and rivals now wish they had done more to stop it.
Boohoo has become the latest online retailer to stop free returns. It will now charge £1.99. As I have mentioned before, the cost of dealing with returned items has been dragging down the profits of online retailers. However what will this mean for sales? One of the attractions of free returns for young shoppers is that they can buy lots of items to try before picking what they want to keep. Story here.
North Yorkshire is still patiently waiting for news on its devolution deal before parliament breaks for summer. Story here.
You should also read this…
The worst (and best) airports for delays and cancellations in Europe right now. Avoid Brussels, Frankfurt, Eindhoven and Luton…try to fly from Bergamo, Gran Canaria or Dublin (Bloomberg)
One of the most extraordinary rise-and-fall stories in British business in recent years has taken another twist – fund manager Neil Woodford seems to have shelved plans for a comeback (Telegraph)
The Bank of England governor Andrew Bailey has suggested that interest rates will return to the historic lows they were tracking at before Russia’s invasion of Ukraine once inflation is under control. This is the most explicit that Bailey has been about where he sees interest rates going in the medium to long-term. These are significant comments, but will they prove to be correct? (Telegraph)
None of the candidates to be the new leader of the Conservative party are proposing this… yet… but it is a fascinating move and the sort of proposal that can shift the dial on what policies are acceptable. Spain’s socialist government is imposing a windfall tax on banks profiting from rising interest rates to try to tackle the cost of living crisis (Financial Times, paywall)
Is the crypto lender Celsius a Ponzi scheme? Interesting summary from inside the crypto world here (Coindesk) and a cracking read on the demise of the company here (Financial Times, paywall). In short, it doesn’t look great for Celsius. That FT piece compares the demise of the company to the collapse of Lehman Brothers…
A new Bloomberg podcast called Losing It is looking into dieting and weight loss. The first episode explains how we have got our understanding of calories all wrong. The actual amount of calories we get from food depends on how easy our body finds it to break the food down, it says, which varies dramatically from person-to-person. The pubs and restaurants around the UK which have just had to put calorie-counts all over their menu will find this a frustrating listen. I have attached a summary of the first episode (Bloomberg)
I enjoyed this look at the tech companies that have sponsored football clubs in the past and how football shirts reflect the rise and fall of different brands over the years. Remember when Wayne Rooney wore an Everton shirt sponsored by Kejian? That company is now bust…(Rest of World)
And finally…
Only Murders in the Building has received 17 Emmy nominations for its first series, it was announced yesterday. This was the best performance for a new show and just behind Succession, Ted Lasso and White Lotus, which won 25, 20, and 20 respectively. The comedy series is well worth your time. Fast-paced, brilliantly acted and with amusing cameos from the likes of Sting, Only Murders in the Building is about how the unlikely trio of Steve Martin (76), Martin Short (72) and Selena Gomez (29) combine to try to solve a murder that has taken place in their apartment block in New York and make a real-crime podcast while doing it. It is a welcome antidote to the wave of heavy-going crime shows around at the moment. Each episode is only around 35 minutes long and they include plenty of lighter moments that don’t derail the heart of the story but distinguish the show from others. It currently has a review score of 8.1 on IMBD. Only Murders in the Building is available on Disney+ in the UK.
Thanks for reading. Off to Lunch will be back on Friday. If you want to read Friday’s newsletter in full, attend our forthcoming events and contribute to the work of Off to Lunch, then please sign up for a paid subscription below
Graham