Sector stays positive amid the negatives

Restaurant and pub operators are bullish about the future despite a triple whammy of rising property, people and food costs.

That is the top takeaway from CGA Peach’s 2017 Business Leaders’ Survey, our big annual poll of around 250 senior executives in the eating and drinking out sector. It paints a picture of a sector that is beset by challenges but that remains pretty upbeat about the next few years—especially as far as start-ups and emerging businesses are concerned.

Of the trio of cost challenges, it is property that is most occupying business leaders’ minds at the moment. Four in five (79%) are either very concerned or concerned about mounting business rates, with half (53%) feeling the same way about other property costs.

Food costs are another big worry. As the latest Foodservice Price Index from CGA Peach and Prestige Purchasing makes clear, inflationary pressure on food will be a big theme of 2017, and our Business Leaders’ Survey finds that four in five leaders (80%) are either very concerned or concerned about it. Three in five (59%) meanwhile feel very concerned or concerned about people and wage costs.

All three of these issues have been imposed on the sector by others. Government-led revaluations have triggered the hike in rates that has so alarmed businesses. Brexit, the weakness of sterling and poor weather have contributed to the food cost rises. And changes to the National Minimum Wage and National Living Wage have sent wage bills upwards.

But this industry is nothing if not resilient. Our poll shows that despite the cost pressures, two thirds (67%) of top execs are either very or fairly optimistic about their business prospects in the 2017—up by six percentage points on a separate snap survey in late 2016. A fifth (21%) of leaders plan to open at least ten new sites this year, and more than half (56%) are actively or possibly interested in acquiring another business.

Our Business Leaders Survey shows that optimism is even greater among new and small businesses. Firms established for less than five years are nearly four times as likely to be very optimistic about their prospects for 2017 than those that have been going for more than ten years.

What this tells us is that small, nimble and flexible operators have few fears about all the challenges in the market at the moment, and will be leading the charge on new openings. They will be keeping everyone on their toes as 2017 wears on.