Measuring the impact of licensing reform

The bearish predictions that “liberalised” trading hours for UK pubs and bars would accelerate drink-induced disorder have proved woefully inaccurate. Predictably there has been little change. Overall, the impact of licence reform has been muted, in most cases exaggerating previous trends. In reality it is probably too earlier to tell exactly what the benefit of the new laws will be, especially given that the laws were introduced little more than a week before the key festive trading period. But work undertaken by M&C Report, in conjunction with Panmure Gordon, indicates there will be winners and losers. In terms of the festive trading period, December was a month of two halves: relatively quiet H1 and busy H2. In recent years, the festive surge in trading has started later, squeezing a similar amount of trade into a shorter period of time. In addition, many high street operators suffered in late November and early December from greater police interference. There have also been reports of widespread interference from local authority representatives, keen to impose themselves in the wake of their newly acquired powers. Local authorities still seem unclear of their remit. Anecdotes include one licensing “inspector” who demanded to see the first aid box and another, where the LA wished to impose a fee for registering the name of a new pub. Residential pub operators have intimated a sales uplift of between 1% to 2% in the wake of reform, with older clientele not travelling into town-centres as much, on Thursday nights in particular. In profit terms, Panmure suggests that this is neutral for managed pubs and beneficial for tenanted pubs. Managed pub restaurants are likely to accrue most benefit from extended Sunday trading, particularly what has been dubbed the “golden hour” between 11am and 12pm on a Sunday morning. This would certainly seem to be the prize for the big food groups, such as Mitchells & Butlers, Whitbread, Greene King and Wolves. The challenge for M&B brands such as Toby has for a long time been largely an issue of capacity: how to serve more customers in pub-restaurants perceived as “full”. Panmure suggests that on the high street large differentiated nightclubs have continued to outperform - good news for operators such as Luminar and Regent Inns. In the high street bar market, premium bar operators look to have traded positively overall, particularly those with a strong London foothold. The performance of mainstream discounters, such as JD Wetherspoon, should have been flat to marginally positive, implying little benefit from licensing reform. In our chats with JDW, the company intimated that it would not alter its trading hours in the quieter months of January or February, driven by a desire to not further confuse (already confused) customers. Despite lower anticipated sales, the company will retain its hours. On average across the estate this is an extra hour to midnight during the week, extending to 1am on Fridays and Saturdays. In the big conurbations, such as Birmingham and Manchester, it opens to 2am. Nearly all of its pubs now open at 9am. The retention of these opening hours - and associated costs - would suggest narrowing margins in the first quarter of 2006. It is a dilemma many large-scale operators will face. Panmure suggests that like-for-like sales are down around 10% in the privately-owned chameleon bar segment. Unless these assets convert into restaurants, they are likely to fail financially, it says. It will be interesting to note the varying reports on licensing reform as a raft of companies, including JDW, M&B, The Restaurant Group, Luminar and Punch, update the market this month. The picture will probably not become clear until later in the year. As one senior operator told M&C: “You can't answer the question until March at the earliest and in probability, April or May. “It has the potential to benefit us but we've had one cold, dark week in November, then Christmas and New Year.”