The Economy, WFH, visitor levies, tax & NIC, Time Out & other:

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A DAY IN THE LIFE:

I was wondering the other day whilst attending to my brunch, as to whether jars of Marmite ever actually run out?

Or is it always possible to get a bit more out of them?

It’s just that there reaches a point where the butter, toast crumbs, jam and, sad to say, what may well be the odd dog hair makes what’s left so repellent that you have to change it.

Because it’s maybe the latter. Indeed, to the best of my knowledge, I’ve never recycled an empty jar for the very reason that they’ve never been empty and, provided it’s well more than three quarters used up, having something that looks vaguely edible is probably worth paying up for.

Bit pushed but just got time to congratulate the resurgent Hull City on not losing over the weekend and, though not actually putting the ball in the net themselves, in managing to take three points from high-flying Sunderland at the Stadium of Light.

On to the news:

PUBS & RESTAURANTS:

Taxes & costs: 

A joint survey by The British Beer and Pub Association, the British Institute of Innkeeping, and UK Hospitality has found that as many as two thirds of hospitality businesses believe they will be forced to cut their employment levels as a result of rising costs. The trade bodies are are again urging the government to delay changes to the employers’ national insurance threshold so that the sector can continue to grow….

• The bodies says ‘our findings should serve as a clear warning that pubs, brewers, and hospitality venues will be forced to make painful decisions to weather these new costs, which will have damaging impacts on businesses, jobs and communities.’ The says ‘at a time when hospitality has been one of the top contributors to economic growth, the last thing the government should be doing is piling on costs that will impact employment and cut off our ability to grow.’

• The trade bodies continue ‘we want to work with government so we can continue to vitally boost the economy, which is why we urge them to delay the changes to the employer NICs threshold. This would help save jobs and allow the sector to continue on its growth path.’

The economy:

STR released flash UK PMI (purchasing managers’ index) Composite Output numbers for February on Friday saying that the number had fallen to 50.5 from 50.6 in January. Any number above 50.0 implies expansion. The services PMI was 51.1 against 50.8 in January but manufacturing slumped further to 47.4 from 49.2 in January…

• STR says ‘February data signalled another marginal rise in UK private sector output. Higher levels of service sector activity helped to offset a solid reduction in manufacturing production.’

• It says, however, that the ‘sales pipelines remained subdued as total new work decreased for the third month running and at the fastest pace since August 2023. Private sector firms indicated a further steep decline in staffing numbers, largely in response to higher payroll costs and weak demand.’

• Inflation issues. STR says ‘strong wage pressures meanwhile contributed to the fastest increase in average cost burdens for 21 months in February. ‘

• Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence says ‘early PMI survey data for February indicate that business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs.’

• Stagflation fears. Mr Williamson says ‘the lack of growth alongside rising price pressures points to a stagflationary environment which will present a growing dilemma for the Bank of England.’ He says the rate of inflation has ‘now accelerated for four straight months, putting further upward pressure on selling prices for both goods and services’. He adds ‘the survey data point to a further rise in inflation beyond the latest uptick to 3%’.

• Jobs outlook. Mr Williamson says ‘companies also reported that the Budget changes also played a major role in driving intensifying job cuts. Employment fell sharply again in February, dropping at a rate not seen since the global financial crisis if pandemic months are excluded. One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October’s Budget.’

Late night market:

Further research from Obsurvant & the NTIA has pointed out that ‘31% of women rely on taxis as their main night-time transport (vs. 19% of men), leading to higher costs for female nightlife-goers.’ There are safety issues at play as well…

• The research says that ‘younger people (18-24) are more likely to walk or take public transport, but safety concerns remain a major issue.’ It adds that ‘expensive and unreliable transport is forcing many to stay home, further hurting the night-time economy.’ The report concludes ‘we need better late-night transport, safer streets, and fairer costs to keep nightlife alive.’

Other news:

Visitor levies. UKH has come out against the idea of a Greater Manchester tourist tax saying it will harm visitor numbers and spend in the city. CEO Kate Nicholls says ‘it’s really disappointing that the Mayor of Greater Manchester doesn’t seem to appreciate the damage a mandatory tourist tax would have on the city as a destination, which modelling shows would reduce visitor numbers and spending….’

• Pointing to other instances, Ms Nicholls says ‘the impact assessment produced for the Welsh Government’s Visitor Levy showed that it would result in a reduction in visitors of up to 2.5% and would reduce visitor spend by up to £35 million a year.’ She says ‘it’s frustrating to see the oft-used comparison to other major tourist destinations charging visitors a tax used yet again, without recognition that those cities have a significantly lower rate of VAT – often half the 20% charged in the UK.’

• UKH adds ‘it would do further harm to our tourism competitiveness, hit consumers in the pocket and place further burdens on business.’ Ms Nicholls says ‘I’m pleased that the Government has been clear that it has no plans to introduce a tourist tax and we will be holding them to that commitment.’

WFH. Startups.co.uk says that some younger worker are keener to get back to the office than are some of their older peers. UNiDAYS says that some 65% of students over the age of 16 believe a physical office is important for their first job….

• This will come as music to the ears of hospitality operators with venues in office-heavy geographies. Moreover, the survey suggests that nearly half (47%) of those surveyed said they would apply for a job which requires them to attend the office five days a week. Only 11% say they would work completely remotely.

• Alex Gallagher, Chief Strategy Officer at UNiDAYS says ‘it’s clear recent narratives that report Gen Z are reluctant to return to the office are changing.’ He says ‘our research shows that the next generation is more than willing to do so and value the opportunity to spend time with colleagues and learn from them.’

The FT reports that some London restaurants are trying to deter “reservation-squatting”, booking bots and social-media influencers by putting in place minimum spends and the need for deposits to be paid.

CGA has commented on ‘the big boosts of five key event days in Britain’s On Premise.’ It refers to Valentine’s Day, Mothers’ Day, St Patrick’s Day, Fathers’ Day and Halloween saying that, when normalised for sporting events that sometimes coincide, the days have led to an uplift in spend per venue of between £120 and £150…

• That’s enough not to turn down but it will hardly move the dial for most operators. And the figures given will vary widely across venue types. Wet sales could and should increase on St Patrick’s Day but Mothers’ Day is hardly a drinking occasion etc.

• CGA’s Megan Davies says ‘key occasions are pivotal for boosting On Premise sales, but its crucial to tailor strategies to each occasion. For instance, Mother’s Day sees a significant uplift in wine and cocktail sales, suggesting a focus on family-friendly promotions and special menus. St Patrick’s Day, with its strong association with Irish culture, drives stout and premium spirits sales, highlighting the value of catering to themed celebrations. By understanding the patterns and nuances of each occasion, brands and venues can create targeted promotions that maximize sales and enhance customer loyalty.’

Tax changes: John Eckbert, CEO of Five Guys UK and Europe, has said that NIC increases will slow his growth plans…

• Mr Eckbert tells The Telegraph that the hit to his company in the UK will be £4m. He says ‘think about how many stores we could build – all this does is restrict our ability to invest and grow. If we had £4m more I would absolutely build more stores and hire more people.’ He says ‘every new store that we open creates 50 to 75 new jobs, it’s £1m in construction expenses and all the jobs that creates. So there’s a huge knock-on effect for every investment that we make. We obviously can’t grow as fast.’

SIBA NI Chair William Mayne says of the publication of the Independent Review of the Liquor Licensing System in Northern Ireland that ‘this detailed review is clear that reform of the licensing system is well overdue and the current surrender principle is failing to protect Northern Ireland’s pubs. Instead it acts as a barrier to innovation and diversity and reduces consumer choice.’ He says ‘we hope that the Minister quickly spells out a path to reform which will enable small breweries to reach their potential and meet consumer choice.’

COMPANY NEWS:

Time Out Group plc on Friday reported numbers for the six months ended 31 December 2024 saying that ‘markets continued growth with strong performance and accelerating openings.’ The company said it was ‘reiterating full year EBITDA expectations.’ Time Out reports revenue of £50.9m (H1 FY24: £52.5m) a decrease of 3%, it says that markets revenue was up 12%. Time Out adds that adjusted EBITDA was £4.8m (H1 FY24: £6.0m) with markets up 12% and media swinging into an EBITDA loss…

• Time Out reports cash of £4.8m at 31 December 2024 (H1 FY23: £7.1m) and borrowings of £39.9m (H1 FY24: £34.8m), resulted in adjusted net debt of £35.0m (H1 FY24 £27.7m). ‘

• CEO Chris Ohlund says ‘we anticipate further growth from both new and existing Markets in H2 which, with a more favourable media background post the UK and US election, and careful cost control gives us confidence that we will deliver EBITDA in line with market expectations for the year to June 2025.’ The group’s shares were down by around 1% on the news.

• Time Out reports that ‘two new Markets opened in the period: Barcelona owned and operated Market in July 2024 and Bahrain management agreement Market in December 2024.’ It adds that the ‘Osaka management agreement Market is on track to open on 21 March 2025.’

• Time Out is clearly a company in transition. The success or otherwise of this change is as yet not completely certain. Nonetheless, the company says ‘Time Out continues to be trusted and relevant for a growing audience as we inspire and enable millions of people every month to experience the best of the city. We continue to grow our Markets revenues and footprint and are developing both new site formats and additional revenue streams for existing Markets.’

• The company concludes ‘we anticipate growth from both new and existing markets in H2 which with a more favourable media background post the UK and US election and careful cost control gives us confidence that we will deliver EBITDA in line with market expectations for the year to June 25.’

Chinese coffee company Luckin Coffee has said that it is still committed to its low-cost drinks strategy despite rising costs hitting margins. The company says ‘we don’t have plans to increase prices and our RMB 9.9 coffee promotion will consistently be available to our customers.’

HOLIDAYS & LEISURE TRAVEL:

Travel Weekly reports that the trade has reported a strong February so far, but noted price levels are continuing to deter segments of the market. Jet2 mentioned last weekends that bookings were coming somewhat later.

Direct train journeys are reported set to be introduced from London St Pancras to Germany, Switzerland and France are set to be introduced in the near future.

A decision on the £2.2 billion plan to bring Gatwick’s second runway into regular use should be made by the government this week.

OTHER LEISURE:

Apple is to remove its highest level data security tool from customers in the UK.

FINANCE & MARKETS:

The ONS on Friday reported the UK’s highest January budget surplus on record. Nonetheless, it was lower than expected and concerns have been raised that taxes may have to increase further.

Sterling mixed at $1.2669 and €1.2055. Oil lower at $74.37. UK 10 year gilt yield 3 basis points lower at 4.58%. World markets mixed on Friday & London set to open around one point lower as at 6.30am.

RETAIL WITH NICK BUBB:

• Saturday’s Press and News (1): On Saturday, the front-page headlines were divided between the PM’s strained relations with Donald Trump and the Apple UK privacy row. The main story in the Guardian was “Starmer seeks to calm Europe’s row with Trump” whilst the Telegraph reported that “PM to defy Trump with new aid for Ukraine”. The i Weekend ran with “Russian links to drone sightings over secret UK bases – MPs call for investigation”. The Times, however, went with “Apple in UK privacy row” and the FT flagged that “Apple closes secure iCloud system”. The Daily Mail continued with its bizarre new campaign ‘to stop AI giants stealing work for free’ from ‘Britain’s creative genius’: “Elton and Cowell back campaign to protect UK talent”. And if you’re wondering what the wretched and discredited Boris Johnson wrote about in his Saturday column for the Daily Mail, he tried to defend both
Donald Trump and Ukraine by saying that “Of course it’s bonkers to say Ukraine started the war. But here’s what I think Donald Trump’s trying to achieve”, encouraging his readers to ignore Trump’s “bizarre and ahistorical” language.

• Saturday’s Press and News (2): In terms of Retailing news in Saturday’s papers, we thought the much stronger than expected ONS Retail Sales figures for January on Friday morning would get a fair amount of coverage and the Times indeed highlighted that “Food shops drive retail sales boost”, whilst the main story in the stockmarket report in the Daily Mail was headlined “High Street surge puts retailers back on-trend”. In the FT and the Guardian, however, there were only snippets about the Retail Sales figures buried within the Economics articles about the weak ONS statistics on the Public Finances. And we were not surprised to see that the Daily Telegraph ignored the Retail Sales figures completely… In other news, the Times had a big feature article on the prospects for a Shein IPO in London (“Will Shein’s London float be sunk by political baggage?”), noting that “Ethics concerns and
tariffs cast a shadow as the fast-fashion giant targets a listing”. The FT had a big article looking at the problems of the big luxury fashion brands after the ‘waning of once-rapacious China demand’: “Top labels suffer rapid churn as Gucci creative boss joins march to the exits”. And the Lex opinion column in the FT looked at the boost that the tie-up with Kim Kardashian gave to the flagging Nike share price last week, concluding that “its next sprint may be about catering to those who just want to scroll on their phones while wearing sweatpants”.

• Sunday’s Press and News (1): On Sunday, the main focus on the front-pages of the papers was on the speculation that the PM, who is to meet President Trump on Thursday, could announce an increase in defence spending soon. The Sunday Times said that Britain’s ambassador to the US, Peter Mandelson, has advised ministers to set a firm deadline for the increase (“Insecure peace ‘risks more war’”) and the Sunday Telegraph headline was “PM looks at faster boost for defence”, while the Observer noted that the meeting at the White House is likely to be “the biggest test of Keir Starmer’s diplomatic and negotiating skills in his prime ministership by far” (“PM lays down Ukraine peace demand ahead of Trump talks”).

• Sunday’s Press and News (2): On Sunday, in terms of Retailing news in the papers, there wasn’t much to report, although the Sunday Telegraph flagged that Walmart has handed Asda a reprieve over the missed target for migrating its IT systems and one of the main stories on the front-page of the Business section of the Sunday Times was that some industry experts expect food price inflation to hit 5.5% this year. The Sunday Times also had an article about the “The Temu sellers’ tax dodge costing HMRC millions” and an interview by the Business Editor Oliver Shah with the new boss of the CMA, Douglas Gurr, who insisted that the competition watchdog hasn’t been muzzled by the Government: “’We haven’t suddenly turned naive on terrible takeovers’”.

• Sunday’s Press and News (3): In terms of the Economics comment columns in the Sunday papers, we give our usual shout-out to the column by David Smith, the Sunday Times Economics correspondent (headlined “If we want more defence, NHS may be in the firing line”), in which he noted that “The UK’s 2.3% puts it ninth in GDP share among 31 Nato member countries” and that Health spending is roughly four times the size of defence spending. We also enjoyed the column by the Economics correspondent Philip Inman in the Observer (headlined “Do you want to buy a British electric kettle? Go whistle”).

Today’s News: A quiet Monday has been enlivened by a bombshell from one of the big share price ‘losers’ in recent weeks, B&M, which has announced that its CEO since Sept 2022, Alex Russo, wants to step down at the end of April and that annual profits will be below expectations. The two things are clearly linked, but there is no comment on the reasons for Alex Russo’s decision: in the statement he merely says that “I have thoroughly enjoyed my time at B&M since joining in 2020… It has been professionally rewarding to assemble and work with a high-quality leadership team and to retire leaving growing businesses with great potential in both UK and France. I wish the Board and the leadership team every success in the years ahead”. As for Q4 trading, after narrowing its full-year adjusted EBITDA guidance slightly with its Q3 update on Jan 9th, from £620m-660m to £620m-650m (versus
last year’s £616m for B&M), the company now says that EBITDA is expected to be in the range of £605m to £625m, which mainly reflects “the current trading performance of the business, an uncertain economic outlook”.

Today’s Press: The excellent press summary email from the Guardian about today’s front-page headlines notes that the Guardian itself leads with ““Conservatives set to lead German coalition as far-right party surges”, while the Times has “Hard right on course for big gains in Germany,” and the FT goes with “Merz poised to become next German chancellor as AfD attracts record vote”. The Telegraph highlights the latest developments in Ukraine with: “Zelensky: I will quit if it brings peace”.

BDO High Street Sales Tracker: The weekly BDO High Street Sales Tracker for medium-sized Non-Food chains gets a lot of focus, because…it is the only weekly (as opposed to monthly) guide that’s publicly available to what’s happening to Non-Food Retail spending. The survey includes a few Homewares and Lifestyle retailers, but, in our view, it is over-concentrated on relatively upmarket/small Fashion retailers and underplays “big ticket” household spending. We also think that the survey’s approach is statistically flawed. However…the latest survey, for what it’s worth, shows that the surprisingly good January trading trend continues in February. In the w/e Feb 16th, Total BDO LFL sales were up by 4.7% (with overall Store sales down by c1.8% LFL on last year, but with overall Online sales up by as much as 15.8% LFL), with total Fashion sales alone up by c5.3% LFL.

News Flow This Week: London Fashion ‘Week’ finishes today, but after the skool half-term break in England, this week sees a pick-up in terms of UK Retail company news, with tomorrow bringing the Victorian Plumbing AGM. On Wednesday we get the Hammerson finals and the Just Eat finals (in the Netherlands), with the Ocado finals and the Howden finals following on Thursday. Over in the US, it’s a big week for the DIY retailers, via the Q4 results from Home Depot tomorrow and Lowe’s on Wednesday.