In Shakespeare’s play Julius Caesar, Brutus comments to Cassius: “There is a tide in the affairs of men, which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves or lose our ventures.”

 

Matt Hancock’s downfall may not be a Shakespearean tragedy but he may well feel the voyage of his life is indeed bound in shallows and miseries. I suspect the political consequences of behaving like a teenage boy at the school disco may go well beyond the destruction of one man’s credibility. It could damage the moral authority of the whole government – making it very difficult for it to extend covid restrictions beyond the 19 July. If that turns out to be the case then, paradoxically, Matt Hancock may well have done us all a favour.

 

The government has been riding high in the opinion polls and basking in the success of the vaccination rollout. But overcaution has caused it to miss taking the current and going with the flow by unlocking sooner. It is instructive to see what kind of political scandal actually lands with the public. The allegations of serial incompetence, of dodgy, lucrative PPE contracts handed to chums of the cabinet, the sheer misery of having to endure the restrictions of the past 15 months – none of these things have dented the government’s popularity. But we’ve seen from the furore over Dominic Cummings’ visit to Barnard Castle, through to the behaviour of world leaders at the G7 partying on the beach, the narrative of one rule for them and another for us ordinary folk is one that really does land and causes huge public anger.

 

Matt Hancock’s behaviour is just the most egregious example of double standards that can cause an emotional reaction and, potentially, a tipping point among the public. There is no doubt the government has engaged in psychological operations to create a climate of fear designed to induce public compliance with lockdowns and other restrictions on our personal liberties. But public co-operation depends on the people believing “we’re all in this together” and I suspect they no longer do. 

 

There have been three huge anti-lockdown demonstrations in London – the most recent was last Saturday. On Sunday, there was a huge rave outside the BBC involving thousands of people and a truck bearing a massive sound system. These protests have been virtually ignored by the mainstream media, or insofar as they were reported they were smeared as being anti-vax protests. The collusion between government and media in refusing to report anything that suggests public support for covid restrictions may be fading has turned our media into a propaganda tool of government.

 

I’ve had many conversations with people who want to protest and demand a return to normality but don’t know what actions to take that might be effective. But a conversation I had with a friend of mine who works as a DJ at a well-known Liverpool nightclub got me thinking. This club is open every weekend but it is table service-only and no one can get up and dance. The table service is both inside and outside the club, so that it becomes a bit of a street party. My friend was asked by the manager to get on the microphone and tell people to sit down if they stood up and started dancing. Now, it is the job of a DJ to get people up and dancing, but nevertheless my friend complied with his manager’s request and a couple of times told people to sit down. But then he thought: “Why am I doing this?” and he decided there and then not to do it anymore.

 

Another example from Liverpool is a rooftop bar where the sounds are blaring out and everyone is up and dancing every weekend. The bar has a ring-round agreement with other bars in the street so that if the police or licensing turn up, every club and bar in the street is contacted and informed of their presence. The music is turned down, everyone sits and when the police walk in, it’s like a vicar’s tea party. Then the cops leave, the all-clear is given and the volume gets turned up and everyone is back on their feet dancing again. It’s become a game, and staff and customers alike know what is expected of them.

 

This is how compliance breaks down. Not so much by big demonstrations, riots or court actions, but by hundreds of thousands of individual acts of defiance. People confirming, by their behaviour, that enough is enough. Many people believe the restrictions on our liberty will not stop until we make them stop. I think we may well have reached a tipping point in which more and more people will simply stop complying and the government will lose control of public behaviour and control of the narrative. The turning of the tide in the affairs of men will be the collective outcome of tens of thousands of individual decisions, and if government wants to avoid this, it needs to get ahead of the curve and lift restrictions now. Let us hope the new health secretary can read the runes.

 

The shadow currently cast over the UK’s hospitality sector is a little larger with “Freedom Day” delayed until 19 July. Inevitably, the prime minister’s much-trailed announcement will have triggered rapid revisions to management forecasts and cash flow modelling and it further intensifies the pressure on businesses that have endured 16 months of closure or severely disrupted trading. The announcement was followed by more positive news, with extension of the moratorium on commercial property evictions over unpaid rent to next March, but this delay is another part of the debt pile puzzle that needs solving as the sector emerges from the crisis. Management teams and investors will need to be more aligned than ever to ensure they have a grasp of the bigger picture.

 

Notwithstanding the stuttering easing of restrictions, we are arriving at a point where operators are starting to look beyond their 12-week cash flow modelling, which, until now, has for so many, for so long, been the focus: cash preservation and winning the right to survive. With the industry within touching distance of restriction-free trading, there is clearly a need for more forward-looking plans and projections, encompassing future opportunities and the successful navigation of the path to robust recovery. In other words, and to borrow a phrase from UKHospitality chief executive Kate Nicholls, it’s how companies and the leisure industry emerge from the shadow of the crisis and side-step an “economic long-covid”.

 

Central to this recovery and future success, more than ever, is people. Not only battered and fatigued operations teams but senior management, be they owner-entrepreneurs or hired experienced managers and leaders. Many who own, or have skin in, a business will have suffered a significant financial, and for some, a psychologically overwhelming hit. At a time when the chancellor is reportedly mulling a top-slicing or axing of entrepreneurs’ relief, covid-19 has scythed equity stakes and delivered a hammer blow to the financial wealth of the sector’s business building individuals.

 

The scale of capital available in the market combined with increased confidence over the strength of the recovery in demand has provided a welcome boost to sector valuations. We have started to see this translate into deal activity with the acquisition of Leon by the Issa brothers and the investment in Itsu by Bridgepoint. 

 

However, while this recovery in value is welcome, a great number of businesses are now encumbered with substantial levels of debt built up during the pandemic, in order to preserve sufficient liquidity to survive. This debt has eaten into equity values and created a big hurdle to overcome before shareholders can start to rebuild value. This scenario presents a significant challenge where the shareholders are also the managers of the business. These individuals have to summon the motivation and energy to go again, to rebuild their businesses and (for some) their life’s work. 

 

If the debt burden is too high, there is the very real scenario that management will be working for the next few years to recover money primarily for their lenders and creditors, and not rebuilding value in their own equity stakes. While this is just the fact of the situation and what people signed up for when penning financing documents, the risk is that if the sharing of value recovery is not amended to ensure alignment of interests, lenders and shareholders will be left with a demotivated management team right at the time they need them most. 

 

As we get back to “normal” operations, management teams and investors will necessarily have to gauge where value may be now and where it may recover to in the future with good management and what constitutes a fair distribution of that value to creditors, shareholders and management. There is a need for everybody to step back, rebase and be pragmatic; to acknowledge and accept the fact this crisis wasn’t anybody’s fault – and to understand that, the best way to recover value for everyone is a highly motivated and properly incentivised management team, willing to take risks to grow again. 

 

Significant effort now needs to be put in to try to achieve fair returns for stakeholders and managers who have been supportive. There needs to be frank conversations on what is achievable and equitable – and what each party can expect in return. None of this is easy and, in the end, everyone has to give something. It requires a flexibility of mindset and willingness to compromise. 

 

Of course, this means lenders, shareholders and management teams need to be on the same page; this is equally a reset moment for all stakeholders. They may take their cues from examples witnessed in the global financial crisis that saw some investors double down on their investments to make sure those incentives were in place. For example, one of global private equity firm Blackstone’s biggest ever returns took place after it had acquired Hilton Hotels at the peak of the market just before the crash. It stuck with the business, doubled down on its investment through the crisis and when value bounced back strongly, Blackstone more than tripled its investment once it completed its exit.

 

With the dial finally moving from survival mode to recovery and rebuild, businesses absolutely require everyone to be aligned. This process can be distracting so the time to ensure this alignment is now, so the business, its managers and its stakeholders are all fully focused on securing as much value as possible from the recovery. Those that do not grab hold of the issue may struggle to avoid the debilitating effects of an economic long-covid.

 

Last Friday, Simon Wilkinson, chief executive of Famously Proper, the parent company of the Byron and Mother Clucker brands, stated on Propel’s Friday Wrap “problems with the supply chain are as much an issue for the hospitality sector at the moment as staffing”.

 

He went on to take the view that order fulfilment in our sector is currently around the 83% to 85% mark – or about one in every six cases ordered not turning up. For specialist restaurants in the dining sector this can be catastrophic because a sushi restaurant without rice or an Italian restaurant without pasta simply cannot trade. The Colonel discovered this the hard way in February 2018 to his cost.

 

At the heart of the problem are two simple issues – demand and resource capacity. In the days that followed the 17 May lockdown easing, the weather improved dramatically, more food outlets opened than expected and way more diners walked through the sector’s doors. Forecasts fuelled by months of bad news were understated at every level of the value chain – operators, distributors, manufacturers and growers all. 

 

Simultaneously, it was becoming clear it wasn’t just hospitality operators facing a recruitment crisis. Traditional routes to recruitment – particularly agency labour (upon which many parts of our supply chain relies) for warehouse pickers and, critically, HGV drivers simply dried up. In fact, this has impacted at every level, with labour scarce in the fields, in the food factories, for the trucks that deliver to our suppliers and within those supplier’s operations. 

 

Labour was a challenge for our whole value chain even before the 2016 EU referendum decision but the pandemic (which started at the same time as we left the EU) has concealed some of its true impacts on the level of overseas labour available until now. 

 

At Prestige, we have been speaking widely with suppliers and operators to get a regular picture of what is happening on the ground. As I write, performance is variable from supplier to supplier with the south of England the most seriously affected. Alcohol is marginally worse than food – again supplier-dependent. At worst, in recent weeks, we have seen service levels reported as low as 75% (fulfilled deliveries), however, it has appeared to improve in recent days with service levels of more than 90% becoming more common. As performance targets are typically about 99%, there is still some way to go for things to be normal. Some supplier depots had fallen behind by a day or two, and are slowly catching up. The key to this improvement has been a combination of capacity increases and demand suppression – the latter of which is often achieved by the larger suppliers raising minimum order/deliver values with smaller customers to use the vehicle capacity, which will create more change in an already volatile market.

 

While we should be pleased with the way performance is improving, I expect there will be a bumpy road ahead. On the demand side, the combination of the full easing of domestic-level restrictions while overseas travel remains restrained will give a big boost to the staycation market. Concerns are already being expressed about very high consumer demand and high traffic volumes in areas of the country with a strong leisure-based footfall. Devon and Cornwall, for example, may see a record summer but if the road system is impacted too strongly, supply may be severely disrupted. 

 

On the supply side, key suppliers met with the Department for Environment, Food & Rural Affairs this week to explore solutions, which resulted in requests for more information. In addition, our sector also relies heavily upon food imports, and some products are already struggling with stable delivery even before the delayed implementation of full border checks for food next January. 

 

What is certain is that we don’t suddenly have a whole industry of bad suppliers out there. Indeed, we should be grateful for the fact we have a strong, diverse, experienced and, generally, well-invested supply community that will grapple with these challenges and, ultimately, prevail. 

 

These challenges are systemic, and are not merely a minor and temporary blip caused by the sector’s reopening. Our suppliers will need our support and understanding, and raised levels of positive collaboration to adapt our requirements to ensure the storm is weathered by our industry. Operators would, therefore, be well advised to strengthen their procurement capability and/or seek independent third-party support because close management of supply is now (and will remain) a business critical issue.

I don’t need to remind anyone that the on-trade, and indeed the entire country, has had to deal with some big challenges over the past 18 months. But, as restrictions are slowly easing and operators have been able to welcome customers back safely both indoors and outdoors, the Euros has come at a perfect time to help give the on-trade a much-deserved boost.

England’s journey through the tournament is progressing in glorious fashion, just like many of us wanted – while for me and other Scots, we’re pleased to have been at the party. And earning a draw against the auld enemy at Wembley was a night to savour.

On Sunday, 13 June – England’s opening Euros game against Croatia – our Star Pubs & Bars managed estate saw week-on-week sales hit an incredible 101% increase as fans chose to enjoy the atmosphere of the pub over staying in to watch at home. This peaked at a huge 160% lift at kick-off as people got their pints in early in eager anticipation of an England goal.

Fast-forward to the England v Scotland and Wales v Italy games the following weekend; despite the wet weather, we saw a 48% and 88% total revenue uplift respectively, versus the same day prior to the Euros. Best of all, the data settles any friendly competition as to which of the home nations had the most loyal fans about getting the pints in – Scottish pubs reached a phenomenal increase of 157%, versus a 48% lift for England and minus 3% for Wales – music to my ears. Of course, I’m less chuffed about our result against Croatia.

But at this point, it was still early days. National excitement continues to bring sports fans to the pub, with the England v Germany match making for the third biggest drinks sales day in June, behind England v Scotland and England v Croatia. The 5pm kick-off brought people into the pub from about 3pm, with sales peaking at the start of the game. By 9pm – well after the match had concluded – revenue was up by 171% versus normal evening trade. No surprise as there was every reason to celebrate. Hats off to Kane and Sterling for sinking two fantastic balls fairly late into the match and ending the 55-year wait to triumph against Germany. Could it really be coming home this year? It seems so – and even as a proud Scot, I’m rooting for England. 

While we can’t control the results, we can dictate the atmosphere delivered to sport fans visiting the on-trade. Our data shows operators making the most of their outdoor space with seating and additional screens helping to boost sales by between 95% and 111%. While even those with no garden have seen a 63% sales uplift.

Mirroring the wider market trend for premiumisation, consumers are also maximising their return to the pub by treating themselves to more premium lager options. Perhaps fittingly, premium European beers such as Italy’s Birra Moretti and Dutch Amstel delivered 90% and 107% revenue boosts respectively during England’s opening match. While not to be outdone, I’m pleased to say our Euros official beer sponsor Heineken served 80% sales uplift and more than 7,000 bookings have been made to date at Heineken pubs on MatchPint – football fans are out in force to support their national team and local pub.

Serving sports fans the best atmosphere and drinks offering has got the UK public off the sofa and cements the great British pub’s position as the place to watch the tournament.

Since reopening, we have seen the trade build nicely week-on-week with warmer weather, greater consumer confidence and more time being spent out of home, all contributing to positive performance curves. There’s still a way to go until the on-trade reaches pre-pandemic normality, but it is a promising and welcoming sight to see customers returning to pubs across the UK to catch a slice of the Euros. Now let’s keep our fingers crossed England continue this momentum (avoiding penalty shootouts) and encourage fans to support not just international football, but the on-trade too.