UK’s casual dining restaurant numbers drop for first time in nine years

Britain’s supply of casual dining restaurants dipped for the first time in nine years in 2018 as a sustained decline in the wider licensed sector continued.

According to the  Market Growth monitor from CGA and AlixPartners, the UK had 5,780 managed restaurants in December 2018—27.3% or 1,241 more than just five years ago.

But casual dining brands now appear to have peaked, with numbers slipping by 0.1% from December 2017.

The news follows rising concerns about over-capacity in the restaurant sector, as well as mounting pressures on property, people and food costs and Brexit-related dents to business confidence.

The Market Growth Monitor reveals important nuances in the fortunes of managed restaurants around Britain. Outside the M25, there was a 0.9% drop in the total in the year to December 2018—but inside it there was a 1.5% rise. High streets, where over-supply has been most notable, saw managed restaurant numbers dip 1.1% year on year, while suburban areas recorded 2.2% growth.

CGA vice president Peter Martin said: “The boom in managed restaurants has been one of the British economy’s great success stories of the past decade. But after a string of closures and CVAs in the casual dining sector in the last 12 months, the sector is now in net decline—albeit a very modest one. We can expect to see further contraction in numbers over the course of 2019.

He added: “Many casual dining brands continue to thrive, and we are seeing continued strong growth for small and medium sized groups in particular. Operators that have a distinctive offer, execute it brilliantly and select the right sites have a lot to look forward to—but for bigger brands that fail to keep pace with changing consumer habits and demands, the next few years may be a lot more challenging.”

There is better news in the Market Growth Monitor for pubs and bars—especially those generating the majority of sales from drinks.
Closures of drink-led pubs and bars averaged 3.6 a day in the last five years, but in the last 12 months the pace has slowed substantially, to 2.2 a day. It follows a strong 2018 for many pub operators, on the back of hot summer weather, the football World Cup and the rising popularity of drinks including craft beer, cocktails and artisan spirits.

Martin said: “The last decade has seen a relentless decline in Britain’s number of pubs and bars, but there are welcome signs that the clear-out of unsustainable sites is starting to ease. With consumers’ drinking trends working in the sector’s favour, and food-led pub operators facing the same challenges as managed restaurants, the outlook for drinkers’ pubs is better than it has been for a long time.”

AlixPartners managing director Graeme Smith said: “The more positive outlook for pubs and bars is reflective of the buoyant M&A activity in the sector. Trade and private equity buyers are turning their gaze to pub and bar assets. This reflects not only the saturation of certain parts of the restaurant market, but also the combination of reduced supply and the continued rise of quality wet-led pub and bar operators. These factors have been driving strong performance in a challenging environment.”