Morning Brief – Another Round?

Morning Brief – Another Round?

SGM-FX
Thu 2 Jul 2020

Another Round?

 

One of the more noble of public surveys carried out recently came from the Centre for Economics and Business Research (CEBR). They asked UK adults whether they will be heading to the pub in the near future as they open their doors to the public for the first time in 103 days (not that I’ve been counting). Now of course some restaurants will be opening this weekend and arguably the economic impact of consumer spending in such venues will be larger and more important for the UK economy. However, the results are not half as fun to discuss nor are they available in such amusing detail thanks to a special report from beverage leviathan AB InBev and the CEBR. The answers to the survey? Well, more than one in three of them was a firm yes.

 

The CEBR predicts that around 35% of adults plan to frequent such hospitality venues over the next week. Some 6.5m of us are expected to make a trip to the pub this coming weekend, almost a 50% increase versus a normal July weekend. We’re also expected to reach a little deeper into our pockets and I suppose livers with analysts predicting a 32% increase in spending by those propping up the bar (or not!), equivalent to an extra 2.1 pints or 1.9 glasses of wine per person for those attending. I admit, even having looked at the analysis in more detail, the projections seem a little too accurate to be credible. However, the headline is that the United Kingdom is expected to spend a whopping £210 million on a combination of lager, wine, cheese and onion crisps and pork scratchings.

 

Here’s the fun bit – £210m across 6.5m people. That’s more than £32 a head. Having conducted my own research I can tell you that in London you’ll struggle to get 6 pints of fairly average lager for this spend. Still, quite a hefty consumption over one weekend if you ask me. Given that this is of course a nation-wide survey, on average that £32 is likely to buy you almost 9 pints if you round up across the UK. Supposedly, Shropshire is the cheapest county on average for a pint at a penny-saving £3.37 on average. That’s close to ten pints or, a fairly serious hangover; try that maths after spending £32! The reopening of the hospitality industry and spending figures like this do offer a serious contribution to economic output. The forecast increases in consumer spending across the board should have a tangible impact upon the UK economy.

 

The easing of lockdown restrictions that will take place this weekend will increase the risk of a second spike in infections. With the virus still considered to be in general transmission amongst the community the easing of the lockdown this weekend is targeted in order to minimise pandemic risk whilst minimising further economic underperformance. The partial economic reopening this weekend comes as the accommodation and food services industry is down 40.9% on a three-month rolling basis. The success of the measures introduced this weekend to avoid a second spike in infections whilst encouraging economic activity will be critical in determining the short-term value of the Pound.

 

 

 

Discussion and Analysis by Charles Porter

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