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Pubs call for one-metre social distancing rule as reopening pushed back to July

Given a longer lockdown than expected and greater social distancing restrictions, analysts have cut their forecasts again

JD Wetherspoon -

The UK government is facing calls from pubs groups to reduce the two-metre social distancing rules when pubs and restaurants reopen from the coronavirus lockdown later in the summer.

New government guidance states that hospitality sites will not open until 4 July at the earliest.

Many pubs may not even be included in the first wave of leisure sector reopenings, analysts warned, because of the difficulty in fitting in with social distancing rules. 

The government gave little detail on any hierarchy of openings, but analysts at Berenberg said they expect venues that can more easily manage social distancing, such as restaurants with outdoor seating, to be closest to the front of the queue. 

“Pub and bar indoor space is likely to be last,” the analysts said in a note to clients.

Closed for four months

The British Beer and Pub Association (BBPA) trade body said many pubs would struggle to open under current guidelines and called for the UK to follow World Health Organisation guidelines of one metre distance.

“Reopening in July will be great for those pubs who can meet the social-distancing measures required by then,” said BBPA chief executive Emma McClurkin. "However, it must be recognised that no two pubs are the same and for many, ensuring a distance of two metres will be impossible, keeping them closed for much longer.”

When pubs were forced to close on 20 March many analysts expected three months of full closure under the shutdown but the government’s July guidance means this is one month more than most forecasts had assumed.

“Given the longer-than-expected closure period, the likelihood of social-distancing measures being in place for at least the first few months following reopening and early data from countries ahead of the UK experience, such as China, we have also reduced our expectations on the pace of the initial bounce back,” said Berenberg. 

This varies by sub-sector, with pubs and restaurants expected to reopen with revenues down by around 50%, and hotels to reopen down by circa 60%, before both recover only very gradually. 

“Fundamentally, we do not believe an extra month of lost revenue meaningfully changes the value of these businesses, particularly now that most have liquidity to see them through the coming months,” analysts said.

Berenberg forecasts calendar 2019 revenue levels will not be reached until at least 2022.

Sector stock picking

With the trading outlook for at least the next 12 months more uncertain than at any time in most of these companies’ histories, the analysts’ preference is for companies with “the best balance sheets, the best brands and the best momentum prior to the pandemic”.

As such, after rejigging their forecasts for a range of consumer focused UK companies, the bank’s top picks are JD Wetherspoon PLC (LON:JDW), Dalata Hotel Group Plc (LON:DAL), Pets at Home Group PLC (LON:PETS), Fevertree Drinks PLC (LON:FEVR) and Hollywood Bowl Group PLC (LON:BOWL).

Greggs PLC (LON:GRG) was also upgraded to ‘buy’ from ‘hold’.

Mitchells & Butlers PLC (LON:MAB) and Fuller, Smith & Turner PLC (LON:FSTA) both remained rated 'buy', while Marston's PLC (LON:MARS) was kept at 'hold', along with Nichols PLC (LON:NICL) and AG Barr PLC (LON:AGBR).

Quick facts: JD Wetherspoon

Price: 971.5 GBX

Market: LSE
Market Cap: £1.17 billion

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