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South Western train strike adds to London hospitality woes

Published:  12 December, 2019

Nik Darlington from importer Graft, which specialises in supplying the London on-trade, says the South Western Railway strike alongside steep business rates and overbearing rents with could tip some hospitality businesses over the edge this Christmas…

How much of a typical London hospitality business’ annual revenue is made in December? 10 per cent? 20 per cent? The exact amount will vary of course, but I spoke to a small pub company with sites across the capital and they make 10 to 12 per cent of turnover in this month alone. This would tally with anecdotal evidence elsewhere.

That is an important sum of money and for many hospitality businesses December remains a make or break month. Have a good Christmas and you can sail into the New Year bruised, battered, but ready to climb the mountain again.

But have a bad Christmas and it could be curtains. Suppliers to the hospitality trade approach January with some dread due to the heightened risk of closures and defaults. This is why restaurants, bars and pubs need this month’s South Western rail strike like a kick in the head.

After all, they’re already on their knees. The UK restaurant trade is already set to shrink three per cent in 2019 according to MCA Insight. This would be the fastest decline in seven years. MCA attributes the fall to a “perfect storm of rising costs, over-supply and weak consumer demand”.

Business rates and overbearing rents are killing restaurants in London. Rates increases of as much as 300 per cent are not unheard of. PWC’s 100 Group analysis, as reported this week in The Times, shows the proportion of tax raised from property – including business rates, the Treasury’s sixth largest source of income at £31.1 billion – stands at 12 per cent, which is twice the OECD average and the highest in the EU.

What’s more, weaker sterling (down as much as 20 per cent against the Euro since the EU referendum) has inflated costs of supplies. All the while, punters are keeping their hands in their pockets more due to the economic uncertainty hanging over the country like a bad smell.

Back to the strike, called by the National Union of Rail, Maritime and Transport Workers (RMT) as the latest instalment of their argument over the role of train guards. You might remember season one of this sage, involving Southern trains and what’s become the longest-running industrial disputes in history.

The month-long walkout has meant the cancellation of 46 per cent of the South Western timetable. This railway network covers key commuter areas in Surrey, Berkshire, Hampshire and Somerset and carries 216 million passengers per year.

There were already likely to be fewer commuters in London this month. Workloads are easing off as we approach Christmas. We work from home a lot more these days – up 27 per cent in the past decade according to TUC research – and it’s likely this rises naturally in December, especially when schools break up.

If the reports from trains during the early days of the strike are anything to go by, more and more people will put off coming to London at all. I commute by train from Surrey into London most days and what I have seen and heard locally suggests wherever possible commuters are changing work schedules and plans.

What does this mean for hospitality businesses in London? It means a key customer demographic is at risk of staying away, and just at that time of year that if they’re in London at all they are far more likely to go out for a proper lunch, stay for drinks after work and stay later still for dinners and celebrations.

Thankfully tourism in London is holding strong, especially from abroad given the present attractiveness of the exchange rate for many visitors, and this may well be the saving grace for many business this Christmas.