M&B, VAT cut, confidence, insolvencies, late-night, JDW & other:

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A DAY IN THE LIFE:

Well, we’re in the process of making it to the end of another five-day week and, with the sun now shining and a three-day weekend opening up, that’s not coming, for most of us at least, a moment too soon.

However, whilst the weather will be good and we can have a lie in on Monday, the weekend is being somewhat enshadowed, which MS Word insists is not a real word, by a) the need to cut the grass and, even more ominously, by b) The Mighty Hull City’s appearance at Wembley tomorrow to challenge for a place in next season’s Premiership.

And this will be, somewhat remarkably, the club’s fifth appearance at Wembley in the last 20 years. They comprise three playoff finals, an FA Cup semi-final and an FA Cup final, of which the Club has won three, lost one and one will be decided tomorrow.

But anyway, best put that out of mind and, for the last time this week, let’s move on to the rather sparse news:

PUBS & RESTAURANTS:

Temporary (and very selective) VAT cut for the summer:

Chancellor Rachel Reeves has said that the Treasury will cut VAT to 5% on UK attractions such as theme parks as well as on children’s meals during the school holidays. She says she will raise more tax from global oil firms in order to make ends meet…

• The chancellor has also previously announced a postponement of fuel duty rises and she adds that she will be suspending import tariffs on some foods. She says, just in case the supermarkets want to be told how to run their businesses, ‘I expect supermarkets to pass these savings on in full to their customers.’

• Referencing oil companies, Ms Reeves says ‘we must ensure that those who benefit from increased prices and volatility pay their fair share.’ She says that some oil companies ‘have structured their tax affairs in a way which ensures they pay little or no corporation tax on their UK energy trading profits.’ This is no doubt true, but the oil companies will not be alone as global social media companies are likely to be engaging in the same tax-structuring schemes.

• The VAT cuts should help some visitor attractions companies – as well as family-restaurants – directly. In theory, at least as, when VAT was cut during Covid, companies widened (or at least protected) their margins and the benefits were not passed on. The governmental body-language this time around seems to suggest that price cuts should be passed on.

• Supermarkets have responded by saying that the import duty cuts will not make a material difference but the CBI reports that ‘with households continuing to feel the squeeze from elevated costs and ongoing global instability, the Chancellor’s instinct to shelter consumers is both understandable and welcome.’ It says ‘while the measures outlined should provide a short-term boost to consumer confidence, businesses would welcome further engagement with government to develop longer-term solutions to tackle the underlying cost pressures facing the economy.’

• And UKH responds by saying that ‘the VAT cut is a positive step for family days out, and the Government should now take a ‘bold’ step to cut VAT for the entire hospitality sector.’ Chair Kate Nicholls says ‘a 5% rate of VAT for family admissions to visitor attractions, children’s meals and soft play is a positive step to help families enjoy a great British break this summer.’

• She says ‘this should now be viewed by Government as a downpayment on a wider shift to a lower VAT rate for the entire hospitality sector, to bring us in line with Europe. Our biggest competitors benefit from VAT rates that average around 10%, and can be as low as 7%, and the UK is a clear outlier.’ She says ‘VAT is the single biggest lever’ that the government can pull to lower prices, tackle inflation, drive demand, boost spending, generate growth and create new jobs.

Consumer confidence:

GfK has updated on UK consumer confidence saying that, whilst there is a ‘slightly improved mood in May’, there are still ‘clear challenges ahead…’

• GfK reports that its long-running Consumer Confidence Index increased two points to minus 23 in May. That’s basically ‘bad but better’. It reports that ‘four measures were up and one was down, compared to last month’s announcement.’

• Neil Bellamy, Consumer Insights Director at GfK, comments that ‘consumers appear to be in a more generous mood in May, with a two-point increase in the headline score and improving perceptions of both personal finances and the wider economy.’

• He says ‘in contrast, there is a drop in major purchase intentions, with this measure down two points to minus 20 in May, its lowest level since January 2025. Key income groups are recording more worrying major purchase scores. For those earning £14,500 to £24,999, for example, the May score is minus 33, a 19-point fall below the minus 14 seen in April.’ He adds ‘similarly, there is also a steep fall within the average household income group (£35,000 to £49,999), with a 10-point drop from minus 17 to minus 27.

• He says ‘clearly, for specific groups of consumers, the impact of cost-of-living pressures are acute. Moreover, our savings measure – down by the unusually high amount of 10 points – suggests people are diverting funds from savings accounts to pay for day-to-day expenses. Inflation may have fallen in April, but with price pressures expected to rise again and continued uncertainty around interest rates, it’s unlikely May marks the beginning of a sustained improvement.’

• Langton. This is a mixed bag with some telling comments. As usual, consumers are more optimistic about themselves than they are about ‘other people’ and the economy at large. But the survey also suggests that big ticket spending is under major pressure (holidays, possible trading down, car purchases, major furniture, carpets etc). This is generally not a positive but it may benefit ‘affordable treats’.

• And the survey suggests that lower income groups are feeling the pinch more acutely than are their better-off fellow-consumers. This makes sense as basics, such as food, light, heat etc make up a larger proportion of the former’s net income than they do the latter’s. As is often the case, there could be trading down but, on the margin, this could negatively impact those operator catering to a less well-off demographic.

Insolvencies:

The Insolvency Service has released company failure numbers for April 2026 for both corporations and for individuals. It reports that the number of registered company insolvencies in England and Wales was 2,085 in April 2026, 2% higher than in March 2026 (2,037), and 3% higher than the same month in the previous year (2,028 in April 2025)….

• The Service reports that company insolvencies in April 2026 ‘consisted of 371 compulsory liquidations, 1,510 creditors’ voluntary liquidations (CVLs), 183 administrations, 20 company voluntary arrangements (CVAs) and one receivership appointment.’

• It adds that compulsory liquidations in April 2026 were higher than the monthly average in 2025 and the ‘number of CVLs in April 2026 was slightly higher than March 2026 and similar to the average of the past 12 months.’ Administrations ‘were 21% lower than in March 2026 but 78% higher than in April 2025.’

• After some evidence of a levelling off in numbers towards the end of last year, insolvency numbers are broadly tracking sideways. Overall, however, after a period during which government aided business and creditors were rather forgiving, there may at some point be a chill wind blowing.

• Hospitality remains exposed as companies are exposed to consumer spend (or the lack of it) and to cost increases driven by NLW rises and NIC changes. The HMRC – and creditors in general – may be becoming a little less forgiving in their attitudes and a little more willing to take action to recover debts. This is unlikely to change in the near future.

Late night:

NIQ’s latest Night Time Economy Market Monitor has reported that ‘Britain’s late-night economy continues to shrink in the face of rising costs and changing consumer habits.’ It says that ‘the number of bars, clubs, casinos and similar late-night venues have fallen by 1.0% in the first quarter of 2026, and by 5.1% in the last 12 months.’ NIQ adds that the ‘sector has now contracted by 28.9% in the six years since the start of the COVID-19 pandemic in March 2020—equivalent to nearly three net closures every week for six years….’

• NIQ reports that the late-night sector has been ‘disproportionately affected by post-COVID challenges.’ It says that ‘Britain’s total number of licensed premises has dropped by 14.3% in six years, which means late-night venues have closed at more than twice the rate of hospitality as a whole.’

• Disaggregating the magnitude of any individual cause may be impossible. NIQ says ‘the contraction in the night time economy is the result of a powerful fusion of very high operating costs, weak consumer confidence, evolving leisure habits and poor late-night infrastructure.’ All true.

• NIQ adds that ‘late-night bars have been particularly hard hit recently, closing at a rate of nearly six per month in the last year—the worst performance of any segment in the Night Time Economy Market Monitor.’ Director Karl Chessell says ‘while all parts of hospitality face tough trading conditions, the night time economy has borne the brunt of closures lately.’

• He says that ‘some concepts continue to thrive, but thousands of bars and clubs have been steadily weakened by soaring costs and falling sales, and it’s becoming increasingly hard to keep the doors open late at night. More closures over the rest of 2026 are sadly inevitable without targeted and sustained support.’

• And Michael Kill, CEO of the Night Time Industries Association, adds ‘the rate at which late-night venue closures are outpacing the rest of hospitality points to structural challenges rather than a healthy market evolution.’ He says that ‘economic pressures like soaring energy and labour costs and taxes are making it difficult to operate viable late-night businesses, while inconsistent approaches to licensing, transport and policing are undermining the infrastructure that a thriving night time economy needs.’

• Mr Kill concedes that ‘demand is changing’ but he says that it is not disappearing. He concludes that ‘there’s a real risk that we lose vital parts of our cultural and social fabric before new models have the chance to fully emerge.’

Economy

S&P has released its flash PMI for the UK economy saying that it fell to 48.5 in May, well below the 50.0 threshold that marks the difference between expansion and contraction….

• S&P reports that the drop was driven by a fall in the services sector which, as it makes up between 70% and 80% of the economy, has really to be the case. S&P’s PMI reading here fell to 47.9, compared with expectations of 51.0. This is the worst reading since January 2021, when the Covid pandemic was still leading to periodic shut-downs.

• Chris Williamson at S&P says ‘the UK economy is facing a perfect storm as rising political uncertainty adds to the growing impact from the war in the Middle East. Businesses are reporting falling output, surging inflation, supply shortages and job cuts in May.’ He says that the numbers point to a quarterly contraction of 0.2% in GDP.

Fast Food:

Meaningful Vision reports that, though it outperformed the dining market in general, UK fast-food traffic moved into decline in Q1 2026 ‘marking a notable shift for a segment that has traditionally remained resilient during periods of pressure on household spending….’

• Meaningful Vision says that ‘traffic across fast-food chains fell by 1.2% year-on-year in Q1 2026. This compares with a broadly flat performance in Q1 2025, when traffic was recorded at 0%, or 1.4% after February was recalculated for the same number of days.’

• It adds that the ‘decline is particularly significant because it comes despite continued growth in the number of fast-food stores. The number of fast-food stores increased by 1.1% year-on-year in Q1 2026, showing that operators are still expanding. However, this pace of growth has slowed sharply compared with Q1 2025, when the number of outlets rose by 2.4%.’

Other news:

The price of a pint. The MA reports that the average cost of a pint of draught beer has increased by 17p to £5.34 in the past 12 months…

• Maybe we should get out more but that does seem rather high. The MA goes on to say that average standard lager prices had risen to £4.89 with cask beer at £4.91. This suggests that premium lagers have dragged up the overall average. The MA reports that the average cost of a pint of low & no-alcohol beer was £5.11, which also seems a little incongruous.

Coffee prices: The International Coffee Organization’s Coffee Market Report for April 2026 suggests that coffee prices fell by 2.7% compared to the previous month.

Jobs, High Street: William Morrison is to shut 100 lossmaking convenience stores in a move that puts hundreds of jobs at risk, reports the FT…

• The FT says that the ‘closures are the latest step by Morrisons to cut costs and streamline the business after recently shutting pharmacies, cafés, meat counters and florists in stores.’ It adds that ‘as well as a challenging business environment, the supermarket has also faced expensive debt interest costs since a private equity takeover by Clayton Dubilier & Rice five years ago, which analysts say have squeezed the business.’

COMPANY NEWS:

Reporting companies yesterday moved in different directions with MAB down 5.9% on its H1 numbers and YNGA up 4.5% on its own, full year, figures. Sector peers JDW (up 1.4%) and MARS (up 1.2%) managed modest gains whilst FSTA gave up a modest 0.6% of its value on the day.

Red Engine, the parent company to Flight Club and Electric Shuffle, has updated on strategy as it approaches its 10th-anniversary year. The company says that ‘growth momentum continues following the launch of Flight Club Reading and strong FY25 financial results, with international expansion targeted for Northern Europe….’

• Steve Moore, CEO and Founder, says ‘if someone had told us a decade ago, when we were testing prototypes in a shed, that our tech would eventually process one billion dart throws, we would have laughed them out of the room. Seeing that final digit roll over on the dartometer was completely surreal. It’s a massive milestone that belongs entirely to the millions of guests who chose to share their birthday parties, date nights, and post-work drinks and everything in between with us.’

• The company says it ‘is also celebrating continued growth.’ It opened in Reading earlier this month and says ‘while the hospitality sector navigates many ongoing headwinds, the everything-in-house, tech-led, premium competitive socialising model that Red Engine has created for Flight Club and Electric Shuffle demonstrates great resilience as the brands continue to capture consumer loyalty and spend.’

• The company says that it ‘recorded 12% revenue growth for FY2025, with sales rising to £89.8M (up from £80.4M in FY24). Total global system sales, including international franchise partners, rose 25% to reach £146M.’ It adds that its next chapter is ‘Target Europe’, saying that it ‘has initiated a formal search for new partners to spearhead Flight Club’s expansion into Northern Europe.’

One of the largest JD Wetherspoon pubs in central London is set to open within the Trocadero at 30 Shaftesbury Avenue. Property owner Criterion Capital welcomes the move and says the new venue, Piccadilly Hall, ‘will form part of Criterion’s wider strategy to reposition the Trocadero and surrounding estate as a major hospitality and entertainment destination in the heart of the West End….’

• JDW chair Tim Martin says ‘the West End is one of the world’s great hospitality destinations, attracting millions of visitors each year, and we believe this site is exceptionally well suited to the Wetherspoon model of offering good-quality food and drink at reasonable prices in well-managed and historically interesting buildings.’

Pizza Express has reported a rise of 5% in its LFL sales in the UK. It says that it is outperforming the UK casual dining market.

Punch Pubs & Co reports that it ‘is set to unveil an characterful transformation of The Dog House – a much-loved and distinctive pub in the heart of Kennington.’ It adds that ‘once reopened, the Dog House is set to re-establish itself as a go-to destination for locals and visitors alike’.

Drinks Business reports that BrewDog, now owned by Tilray Brands, has reversed its plans to open a long-awaited bar that was to be based in Durham’s Milburngate development.

Vagabond Wines is reported set to open its newest bar in Canary Wharf during the summer.

Nightcap is to launch a new sports bar concept, The Side Hustle, in the St Paul’s / Bank area, reports the MCA. The company is current advertising for staff.

MITCHELLS & BUTLERS – H1 ANALYSTS’ MEETING:

Following the release of its H1 numbers, Mitchells & Butlers hosted a meeting for analysts and our comments thereon are set out below:

Headline financials:

• See also earlier Flash Note.

• Q1 was very good, Q2 was against much tougher comps given the good weather in spring last year – and the movement of some key dates such as Mothers’ Day and Easter.

• Pre-mitigation cost increases c£120m. Next year around £95m (c4% of cost base). Mitigation will clearly bring the latter number down.

• Cash flow was ‘really strong’ given that capex is up as the co has successfully returned to its 7yr refurbishment cycle.

• NAV, pre a revaluation, is 491p per share.

• Overall, the company has met the challenges faced by the industry over recent years ‘really well’ and it is well-positioned for growth.

Trends, strategy & trading:

• Food sales have been more sensitive to cost of living pressures. Wet-led is performing well. Guest scores remain very good.

• Estate is ‘well-diversified but weather remains a major influence’. There is little alternative other than to look through the weather & plan accordingly. CEO Phil Urban describes the H1 performance as one of the best of his tenure, given the tough comps and cost headwinds.

• Co says discounting has picked up. M&B is being very selective. It is driving increased spend per head as frequency is under pressure.

• LFL growth rates should pick up in H2. The World Cup, which would usually be a modest negative for M&B given its food-heavy estate, could be a positive given the late time of a number of matches.

• Return on capital remains very positive. Remodels have returned around 30%.

• The company has made and will make selective freehold acquisitions.

• Ignite is now 10 years old and it continues to deliver. It ‘drives pace & innovation across the estate’. The use of AI is now encompassed within the programme.

• The company ‘remains on course to deliver this year, despite a tougher Q2’. The company ‘will continue to de-gear’.

Q&A:

• Premium units vs value operators? The co sees it more as wet-led vs food-led.

• Discounting in the market? There is more. Some operators are ‘a little bit desperate’.

• Geography? Not much to say but London remains strong.

• Capital allocation. Sell assets to buy-back shares given the discount to NAV? This will ‘remain under review.’ Buy-backs will not be done from debt and nor will assets be sold specifically to buy back shares. That said, modest churn will remain a feature.

• Is the consumer weaker? Will this get worse? Geopolitics must be having an impact, but most of the Q2 slowdown ‘was the weather’. Food in wet-led units has been less strong. Logical considering the weather comps.

• M&A – larger scale (Whitbread units)? Opportunistic. They will ‘always look’. But they don’t need to buy and they ‘won’t overpay’.

• Costs – are there more to cut if the consumer retrenches? Ignite is already working. There are new programmes being put in place. There may be a six-month lag.

• 2027 cost guidance? £95m. Wages is the biggest call here. Assuming 4-4.5% or so.

• Capex. Spent £9m on new sites last year. Full year maintenance capex was up this year.

• Margins FY27? What LFL growth will you need to maintain margins? Around the current growth should hold margins. Cost growth should moderate.

• Which brands are likely to feature re selective acquisitions? In the past, Miller & Carter and All-Bar-One. Would overall depend on the demographics in the area in question. Would ‘love to do more Nicholsons but site numbers (in London) are limited’. Conversions are more likely than is running an acquisition under its own name.

• Ego & Pesto? Growth ‘has not been accelerated’. The co ‘will not convert unless there is a need to do so’.

Langton Comment:

• See also earlier Flash Note.

• M&B’s shares approached their mid-2024 post-Covid peak in February before giving ground in recent weeks.

• Comps – for the company and for the industry given the excellent weather in spring 2025 – have become tougher, but the company remains upbeat in its assessment of current and future trading.

• Cost inflation remains an issue but a) the group’s track record on mitigation – via its Ignite Programme – is good and b) although the Iran War could delay progress, cost pressures should normalise after FY26,

• Hospitality as a whole should grow in excess of GDP and we would expect M&B to be one of the winners in the hospitality sector.

• M&B remains a focused, well-run company that benefits from substantial asset backing. Its share register is somewhat abnormal and observers may from time-to-time express concern as to how value will come out.

HOLIDAYS & LEISURE TRAVEL:

EasyJet reports that summer holiday volumes are now lagging behind sales at this time last year as a result of geopolitical worries and higher oil costs.

CoStar reports that, for the week to 16 May, the US hotel industry saw occupancy levels rise by 1.5% compared to the same week a year ago. ADR was up by 3.9% and REVPAR was some 5.4% higher.

OTHER LEISURE:

Games Workshop has updated on trading saying that ‘for the 52 weeks ending 31 May 2026, we estimate the Group’s core revenue to be not less than £625 million (2024/25: £565.0 million) and licensing revenue of not less than £30 million (2024/25: £52.5 million). ‘ It adds that ‘the Group’s profit before taxation is estimated to be not less than £265 million (2024/25: £262.8 million).’ The company will report its numbers on 28 July 2026.

Spotify and Universal Music Group are reported to have agreed on a deal to allow subscribers to create song covers and remixes using AI.

FINANCE & MARKETS:

The CBI has reported that manufacturing output volumes fell in the three months to May, extending a period of flat or falling volumes that began in late 2022. Its latest Industrial Trends Survey goes on to suggest that manufacturers anticipate output volumes falling again in the three months to August.

Sterling a shade better at $1.3427 and €1.1569. Oil around a dollar lower at $104.62. UK 10 year gilt yield down 3 basis points at 4.97%. World markets mostly better yesterday & London set to open around 48 points higher as at 6.30am.

RETAIL WITH NICK BUBB:

The Planet ONS Watch: We remain a big critic of the quality of the Retail Sales figures on ‘the Planet ONS’, but, unaccountably, City economists continue to treat the clearly unreliable and frequently revised monthly ONS Retail Sales figures as the definitive guide to High Street spending trends, and, in theory, the ONS process of seasonal adjustment should be able to even out the impact of the early Easter, so let’s see what today’s figures from the embattled Office of National Statistics (ONS) for April (the 4 weeks to May 2nd) reveal… The City had expected month-on-month seasonally adjusted sales volumes to edge down by 0.3%, ex-petrol, so the overall 0.4% dip in April should not disappoint the aforementioned economists.

Consumer Confidence Watch: That well known forward-looking indicator, the widely followed monthly GFK Consumer Confidence survey came out overnight and the May index picked up from -25 to -23 (City economists had expected a dip to -28, given cost-of-living worries). Interviewing with the c2000 adults in the survey was, as usual, conducted in the first half of the month and the GfK measure tracking views on whether this is ‘a good time to save’ fell by an unusually high amount of 10 points. The drop indicates that “people are diverting funds from savings accounts to pay for day-to-day expenses”, said Neil Bellamy, Consumer Insights Director at GfK, in the press release, adding that “With price pressures expected to rise again and continued uncertainty around interest rates, it’s unlikely May marks the beginning of a sustained improvement in consumer confidence”.

Today’s News: Games Workshop, the maker of Warhammer, has announced a trading update for y/e May, which, if we are not mistaken, could be a bit disappointing, although all the company does, as is its habit, is give the overall figures: the group’s core revenue is to be not less than £625m (2024/25: £565m), but licensing revenue will be down to £30m (2024/25: £52.5m) and the group’s PBT is estimated to be “only” £265m (2024/25: £262.8m). Yesterday the Next AGM saw a surprisingly large c11% shareholder vote against the Director’s remuneration policy, notwithstanding the excellent stewardship of the business by the management team, whilst Card Factory issued its Annual Report & Accounts (if you want to know what the CEO earned last year…).

Today’s Press: In terms of the front-page News headlines of today’s papers, according to the press summary email from the Guardian, the Guardian itself leads with “London mayor blocks Met’s AI deal with controversial tech firm”, whilst the FT flags that “SpaceX, OpenAI and Anthropic IPOs to trigger Wall Street trading frenzy”. The right-wing press focuses on UK politics, however, with the Telegraph noting that “Rayner in election fraud row”, while the Daily Mail’s take is “Polling fraud row in Rayner constituency” and the Daily Express screams “Stop running away from the Brexit question Andy!”.

News Flow Next Week: After the Bank Holiday on Monday, the big event is the Kingfisher Q1 trading update on Tuesday, but Wednesday brings the Pets at Home finals and the latest monthly Worldpanel grocery sales figures, whilst the rival monthly NIQ grocery sales figures are due out on Thursday morning.