There is certainly pent-up demand in the economy – not just for goods themselves, but to return to socialising with friends and family, or just wander around the shops, or whatever else people like doing to relax. But as we have written before, this return to normality will still not be as simple as flicking a switch. One of the biggest issues for pubs will be stock – breweries will be gearing up again, but how they cope with a sudden surge in demand remains a big unknown, not just in terms of production but distribution. How will their customers, still waiting on brewery refunds for spoiled barrels undrunk during lockdown, pay for their new stock? With credit accounts maxed out, the pressure on their cash flow could be unbearable. In any business cash is king, as Philip Ryland explains on page 26 this week – a lack of it means financial death.
Then how will they sell it under social distancing – table service is a lot more expensive to provide than bar service, and extra staff costs only add to the cash crunch in the hospitality industry, already suffering as a result of the higher minimum wage and several months of no income that stretches back into an unusually wet February. And there could be a rush for PPE equipment depending on the currently non-existent government guidelines for reopening – we may see pubs wanting to open but unable to if the equipment isn’t available to offer staff and customers protection.
I also bought a new car in my break, a transaction that took far longer to process than it should, mainly due to my constant badgering of the sales executive for industry scuttlebutt (I cannot extol the virtues of talking to people as a research method highly enough). And it is the same story – lots of customers coming in to complete purchases postponed by lockdown, but dealers constrained by the logistics of getting cars to customers under new rules and facing a stock crunch. The dealer I spoke to had a month’s supply left at the current rate of sales.
In short, a few queues at Primark or beers on the practice green does not mean recovery is a given. I am also hearing of many companies now laying off previously furloughed staff, an anecdotal backdrop to the job security fears highlighted in the latest IHS Markit Household Finance Index. If that leads to caution it will not be the beer that is ice cold but the economy.
