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The Market

During the period, the impacts of the Covid-19 pandemic have dominated the sector. On 20 March, the Government enforced closure of all non-essential businesses to prevent the spread of the virus. During the initial lockdown closure period, which lasted until 4 July, Government support was made available through the furlough scheme and business rates holiday and thereafter through reduced VAT rates and the Eat Out to Help Out scheme. Despite this Government support, not all businesses were able to weather the prolonged period of closure with continued cash demands. A number of companies entered into CVAs and closure programmes and by the end of October the Alix partners CGA Market Recovery Monitor showed that only 69.6% of total licensed premises had reopened for trading. The report shows that restaurants and independent businesses have opened at a slower rate than pubs, and that bars have been the worst affected.

Since the end of the financial period further restrictions have been put in place, beginning with the tiered regional system in October and followed by the second national lockdown from 5 November as case numbers continued to rise. These restrictions continue to be under constant review and subject to adaptation resulting in an uncertain trading environment, and the extent of the long-term impact on supply in the market is not yet clear.

Demand has also been impacted by Covid-19 with curfews, group size restrictions and consumer anxiety impacting the number and frequency of guests. The Eat Out to Help Out scheme helped to boost demand in August when like-for-like sales across the sector were flat to last year demonstrating that consumers' desire to eat and drink out remained resilient in the right conditions. Despite this, consumer confidence remains fragile and subject to changing macro conditions.

In the longer-term, affinity for pubs and restaurants remains and, as ever, people remain social beings who crave the interaction and the environment that eating and drinking out provides. This was evidenced by the peak in demand in August and by increased demand prior to the November closure of premises across England. However, as long as restrictions continue to tighten, there will inevitably be a negative impact on the trade of pubs and restaurants due to decreased demand.

Delivery and takeaway have been areas of growth for the industry over previous years and this trend has accelerated throughout the pandemic with some competitors increasing the number of outlets offering takeaway. This rise in supply demonstrates customer demand for the convenience of a range of cuisines to be delivered direct to consumers' homes and appears to be resilient to enhanced social distancing restrictions.

Digital technology has also become increasingly important in supporting the business during the pandemic. Technology allows the service cycle to be adapted whilst adhering to Government restrictions. Facilities such as guests' ability to make an order at the table on their phone has been helping pubs and restaurants to reduce contact between our teams and guests, creating a service cycle with which more people feel comfortable. These sorts of technological interventions also help to improve the economics of a service cycle which has become more reliant on table service. The use of technology to enhance guests' experience has been accelerated due to the impacts of Covid-19 and this trend will continue in the short term as offers are tailored to adapt to the new trading environment.

Brexit remains an important event for the market. The precise terms, and therefore impact, of Brexit remain uncertain in the absence of an agreement having been reached. However, the likely impacted areas for the pub and restaurant industry will be; imported goods tariffs; potential restrictions on the availability of goods; and the implications of restrictions on the free movement of labour. We remain close to these issues and have contingency plans in place whilst we await further details.

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Tim Jones Chief Financial Officer Carlie Wakefield PA to Chief Financial Officer +44 (0) 121 498 6112
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Denise Burton Deputy Company Secretary +44 (0) 121 498 6514
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Gabby Shilvock Acting Head of Investor Relations +44 (0)121 498 6514