Two new studies released today have claimed that 6,300 pubs, bars and restaurants will fail by 2015 and that some 6,685 companies in the leisure sector are currently struggling with “significant or critical” financial problems of £57.5bn.
A report by BDO, the accountancy and professional services company, suggests that a “new breed of consumer” is threatening the UK high street. It forecasts that on the whole, some 26,500 retailers will fail by 2015.
Separately, Begbies Traynor, the recovery specialist, has issued what it described as a “red flag alert” for the leisure sector in the UK and intimated that more than 6,000 companies were under financial pressure.
It added that unlike other sectors, the leisure industry – which it combined with travel – has not shown a fall in the numbers of companies suffering in Q2 and Q3 of 2010.
What to do?
The BDO report urges consumer-facing companies to:
• Re-think who their customers are
• Revisit service – what it looks, feels and sounds like
• Continuously review customer spending data
• Focus on what customers need – rather than product diversity
Don Williams, head of retail at BDO LLP, said: “One size no longer fits all. Businesses will not survive and thrive if they do not take steps to understand the psychology of the new consumer.
“The recession has been a catalyst for change and people are becoming much more demanding – they want a personalised experience without paying a premium for it. That means consumers want to buy from retailers who target and treat them as individuals.
“The high street needs to redefine the concept of the personal shopper - only the personal touch will allow retailers to profit from this new breed of consumer.
“There are several ways to do this, but just through effective data capture businesses can start the journey to truly tailoring their approach to customers to activate purchasing.”
However, despite its gloomy predictions on failures, BDO also thinks that consumer spending will recover, with a forecast that retail spend will edge up from 2.6 per cent to 2.8 per cent next year.
Deteriorating consumer confidence
Nick Hood, a partner at Begbies Traynor, added that the leisure sector was one of the sectors that was most dependent on consumer confidence.
He added: "This week has seen the announcement by Visa Europe of a dramatic slowdown in UK spending on recreation, culture and leisure in the past three months, with a virtual standstill rise of 0.4% on a year ago, compared with a 7.5% rise for the year to the end of June 2010. At the same time, VisitEngland has revealed that the number of overnight domestic trips taken in the UK has shown no rise at all in the first half of 2010.
“These figures come against a background of deteriorating consumer confidence ahead of next week's Comprehensive Spending Review, which is likely to confirm the worst fears of many. Retail sales growth stalled in September and with predictions from RICS of house price falls to come, the prospects for the UK's vital leisure sector to hold on to an adequate slice of the spending pie through the remainder of 2010 and on into 2011 do not look good.
“Most at risk will be smaller businesses in the sector, which face difficulties in securing working capital and making the investments in maintenance and improvement of facilities, which is vital to survival in this sector."
BDO’s failure figures were obtained using analysis of the Centre for Economics and Business Research’s (cebr) industry watch business forecasting models, the Office for National Statistics (ONS) annual business inquiry and the VAT-registered business start-ups and closures from the Department for Business, Enterprise and Regulatory Reform (BERR) in 2009.
Martyn Leek is news editor of BigHospitality's sister publication M&C Report.