Are we seeing a softer recession?

There remains a lot of talk and speculation around the future of the UK and the businesses trying to find their way through the proverbial mist to survive the barrage of energy, food and labour increases which have become part of every day life and trading. But are things as bad as they sometimes appear or could there be a bit of a silver lining on the horizon?

In a recent report, the Governor of the Bank of England recently declared that Britain has “turned a corner” in its fight against inflation, but he issued a warning that a recession is still on the cards this year. According to Andrew Bailey, the UK should braced itself for what he described a “long, but shallow” downturn in contrast to eurozone economies which signalled that they will likely avoid falling into recession.

Mr Bailey added that with the winter being warmer than that which was expected, energy prices had been kept at bay and predicted that the cost of living squeeze would ease in the coming months. It is fair that falling energy prices have not yet fed through to consumers but he confirmed that they would do soon, adding “It does mean there is more optimism now that we are sort of going to get through the next year with an easier path there.”

His comments were made after Christine Lagarde, president of the European Central Bank, and German Chancellor Olaz Scholz noted that the outlook for the eurozone had improved markedly in the past few weeks. Ms Lagarde said a “small contraction” is now more likely than a recession, adding: “It’s not a brilliant year but it’s a lot better than we have feared.”

But what does this mean for hospitality and the food service industry as there are signs that the economy is still struggling with consumer confidence falling back to near all-time lows amid spiralling food prices? How have things changed?

According to a recent Barclays report, UK GDP grew surprisingly by 0.1% m/m in November (vs. market expectations of a 0.2% decline), this growth was largely driven by service sector activity. Considering the upside surprises, Barclays Research expect a shallow recession and recovery in the economy with Q4 22 GDP to grow by 0.1% q/q and Q1 23 to fall by 0.2% q/q.

CGA by NielsenIQ’s latest Hospitality at Home Tracker shows that managed restaurant groups’ delivery and takeaway sales ended 2022 at twice their pre-COVID level and that the combined sales in December 2022 were 104% higher than in December 2019, with deliveries up 238% and takeaway and click-and-collect orders 53% ahead.

The figures confirm how lockdowns and the convenience of delivery platforms have transformed the market for restaurants, long after the end of COVID restrictions in Britain. Managed groups received just over 24% of their total sales from deliveries and takeaways in December, the Hospitality at Home Tracker shows. It also highlights the increasing importance of drinks, which now account for 10% of all at-home orders.

With some positivity predicted for the future so also possibly comes the need for continued change and refocus. It is fair to say that the consumer has and continues to change but it is reassuring that, as things currently stand, there may be light at the end of this long tunnel.