Edison Group’s new report: Reason’s to be cheerful: UK leisure ready and waiting explores the anticipated resurgence of the industry as the UK begins its emergence from lockdown. As one of the industries that felt the pandemic’s full brunt, a domestic sector resurgence could be upon us.
Pubs, bars, restaurants, nightclubs, amusement arcades and other recreational activities have all been severely impacted as a result of last year’s pandemic. Furthermore, the pandemic has highlighted a number of structural difficulties in the hospitality and leisure industry and has eroded much of the competition (there has been an estimated loss of up to 30% of restaurants).
Covid has created an opportunity for those left – providing the easing of restrictions continues as planned.
Surviving companies have strengthened finances and accelerated implementation of initiatives, such as using technology in managing labour costs and driving customer loyalty. Delivery has excelled, offering scope for operators with the correct scale and brands. Finally, prime brick-and-mortar locations are now available and with lower property prices available, any business that survived the pandemic is in prime position to take advantage.
A further boost to the leisure sector has been the efficient roll-out of the vaccine in the UK and the relative weakness of roll out on the continent. As a result, international travel is still uncertain, and domestic holidays look likely to be the norm this summer. With a surge in demand from the British public for domestic activities, UK-based leisure companies look to set capitalise.
With the end of lockdown in sight, the report finds that investors’ focus is shifting away from questioning balance sheet strength and is instead of looking towards earnings recovery in 2022. However, funding remains a vital risk given the remaining uncertainty over the timing of the reopening of the hospitality industry. The Edison report notes that for any investment in the sector, it believes company balance sheets must be sufficiently robust to withstand a further six months of weak trading without recourse to shareholders.
Given these sensitivities, Edison’s report identifies 17 companies with a primarily domestic leisure business that are well-positioned as trading slowly begins to work back to normal.
Fraser Thorne, CEO and Founder, Edison Group, said: “The leisure industry was the most exposed when the pandemic hit. Despite furlough, ‘Eat Out to Help Out” and other initiatives, the government could not stave off the inevitable closures. The pandemic exposed the hospitality and leisure industry to unimaginable hardship but what will emerge will be a perhaps smaller but better-structured industry with more variety and more sustainable business models. With the vaccine roll out well underway the outlook for the domestic leisure industry looks very, very good.”
Latest lockdown easing will drive leisure industry’s resurgence, while restrictions on foreign travel could be golden ticket for domestic industry players
Erosion of competition has resulted in growth opportunities for well-funded businesses