The chief executive of Marston’s says the fallout from the UK government’s “mini” Budget has been “incredibly unhelpful” for consumer confidence, even as sales at the pub chain surpassed pre-pandemic levels in the latest quarter.
Andrew Andrea said on Tuesday that rising interest rates and the market turmoil following chancellor Kwasi Kwarteng’s “mini” budget late last month could have a “knock-on impact” on consumer spending.
While Andrea said Marston’s had yet to notice a “discernible change” in customers’ behaviour and that he expected them to continue flocking to pubs in “a natural flight to value”, he cautioned that government policy had added to uncertainty.
The spectre of rising mortgage rates sparked by the “government creating such turmoil in markets” had proven “incredibly unhelpful”.
“The government’s policies drive headlines that affect consumer behaviour,” said Andrea. “We need stability of news flow because that enables people to work out what is really going on and therefore they make their spending decisions thereafter.”
“The government U-turns have also been unhelpful because people are confused,” added Andrea, referring to Prime Minister Liz Truss’s decision to backtrack on axing the 45p tax rate for the highest earners.
But he said that “all signs show that people still want to go out” and that spending on “bigger ticket items” was likely to be impacted first before customers cut back on spending at pubs. The first restriction-free Christmas in three years and the winter World Cup would also be a boon for sales over the winter, he added.
Like-for-like sales across Marston’s 1,468 pubs were up by 4 per cent in the 10 weeks to October 1, compared with the same period in 2019, driven by a jump in demand during the summer heatwave. Total like-for-like sales in the year to October 1 were down 1 per cent on 2019, a comparison that strips out the lockdowns that forced pubs to close in the pandemic.
The chain said electricity costs in the 10 weeks to October 1 had been “higher than originally expected” because of the “volatile market for energy” in recent months. But Marston’s said it had hedged against electricity cost rises for the first half of next year and its gas bill was fixed until March 2025.
Andrea welcomed the government’s implementation of an energy price cap for consumers and businesses “to remove the sword of Damocles dangling over the economy”.