New British measures aimed at slowing Covid-19’s spread, before it wreaks more drastic economic consequences, threaten to derail the country’s nascent consumer recovery. Many Brits had been hoping that the rebound would pick up steam with the impending Halloween celebrations and half-term school holidays.
The measures from Boris Johnson’s government include new restrictions on pubs and restaurants, fresh advice for people to work from home if they can and keeping to six the number of people who can socialize together. From tomorrow, pubs and restaurants will be limited to table service and they’ll have to close at 10 p.m. With last orders at 9 p.m., many businesses will effectively lose an entire sitting.
When areas in northeast England introduced local hospitality restrictions last week, there was a sudden drop off in trade as people simply stayed home. But the implications are broader than the decision about whether to go out for the evening.
All of this feels just steps away from a more comprehensive lockdown, and comes with the very real danger of undermining confidence. The measures send a signal to consumers that the virus is a threat once more, raising questions about whether social distancing measures already in place are enough. Just as they were starting to go out and spend again, Brits will undoubtedly become more nervous about both the health and economic implications of the pandemic.
The timing is particularly difficult for consumer companies. Halloween can be a significant event for supermarkets and variety retailers such as B&M European Value Retail SA, which benefit from demand for sweets and plastic pumpkins. It’s an event that sets the stage for the rest of the year, and this year was seen especially as a barometer for things to come.
Beyond the trick-or-treating, Halloween has become popular with adults too, who revel in partying at pubs and clubs in ghoulish costumes. That’s unlikely to be the case this year.
The half-term holiday was also poised to be a big getaway week for tour operators and airlines. Travel companies had hoped business would pick up after many British families skipped their summer vacation abroad. With recent changes to travel advice, that demand has waned. European tour operator TUI AG said yesterday it had cut capacity for the winter season by a further 20%.
It’s now impossible to guess what the year-end holiday season — which accounts for a large proportion of retailers’ and restaurants’ profits — will be like. That helps explain conflicting outlooks from British retailers last week. Next Plc was cautious. By contrast, John Lewis Partership Plc said it was expecting Christmas sales to be the same or better than 2019.
Both views have their supporters. Affluent employees who have worked from home have amassed savings, which they might spend online. Those who’ve lost their job, or face redundancy with the cessation of the U.K. furlough support at the end of October, will be thinking differently. Whitbread Plc, owner of the Premier Inn hotel chain, said yesterday that it planned to cut as many as 6,000 jobs, almost a fifth of its workforce.
There is a chance that by acting now with more stringent measures, the government will make sure some of the pain is out of the way by Christmas, saving the crucial trading period for retailers and restaurants. That’s highly uncertain, though, especially when so much spending in the run-up to the holiday will be determined by whether consumers have the festive feel-good factor. Andrea Felsted, Bloomberg
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