Searching for the signs

The winter weather that so disrupted trade in the first couple of weeks of the year has retreated and the optimists have begun to hunt for signs of a recovery. If you look hard enough, there are some.

Overall, trade remains difficult and there will be further collapses, but some companies are feeling a little more positive about the future than they have for a while. The mood is very gradually changing from one of battening down the hatches to getting ready to maximise opportunities when the better times start to appear.

That the number of outlets for wines and spirits has diminished over the past year is undeniable; a net 1,500 pubs closed in the first half of 2009, according to the latest figures from the British Beer and Pubs Association, and other on-trade outlets such as clubs, wine bars, restaurants and hotels will have suffered similar fates, although there are no centrally-monitored statistics to confirm the trend.

The recession has forced the weakest to the wall – just drive around any of the UK’s inner city areas and count the boarded-up former street corner locals and restaurants.

But as the weak have failed, the more resilient have become stronger. Customers do not stop going out because their local wine bar has closed – most move on to other outlets. As one bar closes, its rival at the other end of town may become much more viable thanks to the custom no longer being split.

And a consensus is growing that those on-trade outlets that have survived now have increased chances of better times. For instance, Capital Economics, the respected forecasting house, said this week that the pubs and restaurants sector is likely to be less vulnerable to a further downturn than many other parts of the economy as consumer spending is squeezed. Put simply, those who have cut out going out cannot cut back further. That’s hardly a vote of confidence, more a suggestion that things cannot get worse.

More positively, the word “expansion” is returning to the lexicon. For instance, JD Wetherspoon anticipates opening 50 new outlets this year (it ceased trading in just two during the downturn). That compares with its November forecast of 40 new openings this year. Enterprise Inns says it has spotted signs of improvement, despite the general market remaining “testing”. In the 38 weeks to 24 January, Greene King’s like-for-like sales were up by a healthy 4.3% and its tenanted division fared better than most analysts expected.

These comments do not build a wall of evidence and nobody is calling an end to the recession, far from it. But as the company results season gets into swing, other encouraging statements will help to lift the gloom.

Finance on Friday, 29.01.2010