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"Eat out to help out" failed to arrest decline in hospitality sector's sales in the third quarter

A survey by The British Chambers of Commerce revealed that 66% of respondents in the hospitality and catering sector reported a fall in sales and bookings between June and the end of September

Compass Group -

The government’s popular “Eat out to help out” scheme failed to reverse a fall in sales in the hospitality sector in the third quarter.

A survey by The British Chambers of Commerce (BCC) revealed that two-thirds of respondents in the hospitality and catering sector reported a fall in sales and bookings between June and the end of September, which included the period in August when the government spent more than £500mln in subsidising meals in restaurants.

The BCC’s Quarterly Economic Survey (QES) found that business conditions remained weak in the third quarter of 2020, despite much of the economy reopening.

The BCC said 46% of firms surveyed reported a decrease in domestic sales, while just 27% reported an increase on the previous quarter. This was, at least, an improvement on the second quarter, when 73% of firms reported a decline in domestic sales.

As for exports, 47% of firms reported decreases in export sales, down from 72% in the second quarter (Q2) but still well above the first quarter rate of 21%.

Cash flow, a key indicator of business health, continued to deteriorate for almost half of firms, the BCC reported.

In the third quarter, 21% of firms reported an improvement in cash flow (Q2: 11%), 34% reported no change (Q2: 25%) and 45% reported a deterioration (Q2: 64%).

“Our latest survey indicates that underlying economic conditions remained exceptionally weak in the third quarter. While the declines in indicators of activity slowed as the UK economy gradually reopened, they remain well short of pre-pandemic levels with little sign of a swift ‘V’-shaped recovery,” said Suren Thiru, the head of economics at the BCC.

“The manufacturing sector recorded the strongest improvements in the quarter, while consumer-focused services firms, where social distancing restricts activity, saw more limited gains. The persistent weakness in cash flow is concerning as it leaves firms more vulnerable to external shocks, including further restrictions,” the economist added.

Thiru said the government’s “Winter Economy Plan” may provide a short-term boost to the economy but added that “with restrictions tightening and the economic scarring already caused by the pandemic starting to crystallise”, the resulting gains in economic output are likely to fade over the coming months.

The government’s “eat out to help out” scheme, while criticised in some circles, proved very popular with the public, with an average of around 65mln meals a week consumed under the scheme, rising to more than 100mln in the final week as Joe & Josephine Public rushed out to prove that whole there may be no such thing as a free lunch, there is (or was) such a thing as a free starter …

Since the scheme ended, the government has apparently changed its mind on wanting people to return to town centres in the evening and has imposed a 10pm curfew on pubs and restaurants in an attempt to check the spread of the coronavirus (COVID-19).

Following the release of the BCC survey, shares in contract caterer Compass Group PLC (LON:CPG) were down 0.6% at 1,160.5p, pubs group Mitchells & Butlers PLC (LON:MAB) was 1.8% lower at 132p and Restaurant Group PLC (LONLRTN) was 3.8% weaker at 50.05p.

Quick facts: Compass Group

Price: 1156.105 GBX

LSE:CPG
Market: LSE
Market Cap: £20.62 billion
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