The average operating costs for licensed businesses have passed 50% of turnover, according to the latest edition of the ALMR Christie & Co Benchmarking Report.
It’s the first time in the report’s 10-year history that costs have passed the 50% mark, as operators are hit by increased operating costs and tightening margins. Operating costs across all trading styles now stand at 51.5% of turnover, with growth across the entire survey at 1.1%.
However, the report also found that some areas were experiencing growth. Licensed accommodation, which also enjoyed success in last year’s report, this year grew at 5.1%, while there was also a resurgence in nightclubs which grew at 3.6%.
For the first time, the report also includes a confidence survey which highlights that there is confidence within the sector, particularly trading prospects for 2017 in both anticipated like-for-like turnover growth and anticipated profitability. The majority of respondents felt Brexit would have little impact to their business in 2017.
'Employers are looking at the political instability and uncertainty caused by Brexit and the possibility of significant cost increases, as wages rise and rates reliefs expire,' ALMR chief executive Kate Nicholls, said.
'There is a risk that additional costs could hit at a time of great instability hitting eating and drinking out businesses that are crucial to the UK economy and have helped restore prosperity to our town and city centres.
'However, the continuing growth of accommodation in the eating and drinking out market, and the welcome revitalisation of nightclubs, highlights the innovation and dynamism on show in our sector.'
Neil Morgan, managing director for pubs and restaurants at Christie & Co, added: 'Despite the well-documented decline in pub numbers over the past three decades we are seeing a more lean and competitive sector emerging as operators diversify and respond to the continuing evolution of the UK consumer landscape.
'What is clear is that operators must prepare for both the challenges and opportunities; therefore, the need for effective business planning is more essential than ever if operators are to not merely weather the storm but seek to thrive in the long term.'