Bars, restaurants, theatres and clubs were hit hard during the pandemic. The need to curb infections meant that these venues were the first to close and the last to re-open, often with limited capacity. Rising energy prices and the cost of living crisis pose new threats to the sector.
Late-night venues such as clubs, pubs and restaurants are an important part of the UK economy. These destinations, which often stay open late into the evening, form a key part of the so-called night-time economy.
Many people rely on this sub-sector. A person is considered a ‘night-time worker’ if they usually work either in the evening or the night. By this definition, 27% of the UK workforce (roughly 8.7 million people) were night-time workers in 2022 (Office for National Statistics, ONS, 2023).
Although a substantial number, this is 700,000 fewer than before the pandemic. In 2016, around 9.4 million people typically worked late (see Figure 1).
Figure 1: Total number of night-time economy workers in the UK, 2012-2022
The night-time economy is not made up just of bars, nightclubs and gig venues (see Figure 2). A large share of night-time workers have jobs in healthcare (think of nurses and doctors on late shifts), retail (those re-stocking supermarkets and warehouses ready for opening) and manufacturing (people on the factory floor keeping supply chains and production lines moving).
Figure 2: Share of night-time workers by sub-sector (SIC section), 2022
But for the purpose of this article, we will focus on people working in night-time ‘cultural and leisure activities’ (to use the ONS category name). In plain English, this refers to the staff serving drinks at the bar, the bouncers working on the door, as well as the chefs and cleaning staff busy behind the scenes. It also includes the actors, musicians and DJs up on stage; the sound and lightning engineers creating the atmosphere when the curtains open; and the taxi-drivers who arrive when the fun is finally over.
Figure 3: Breakdown of night-time workers by industry grouping, 2022
This group is chosen because the night-time cultural and leisure activities group (as well as activities that support night-time cultural and leisure activities) has a higher proportion of night-time workers who work only during the evening and/or the night (see Figure 3). This makes it a useful sub-sector to focus on to review how the UK’s late-night economy is currently coping.
But before looking at present challenges, it is worth reviewing the impact of the Covid-19 crisis – one of the greatest shocks ever to hit this part of the UK economy.
How did the pandemic affect the entertainment industry and wider night-time economy?
When the UK first went into lockdown in March 2020, businesses from all sectors faced an existential threat. But those that rely directly on packing a large quantity of people into a small space – such as bars, night-clubs and theatres – found themselves in a particularly tough situation.
What came next was a prolonged period of extreme uncertainty. Mandatory venue closures were followed by the phasing in and out of local-level restrictions (such as the tier system). Capacity limits (such as the rule-of-six) meant that many places could not operate viably due to the spatial limitations of their buildings. And consumer demand for the experience of being inside packed pubs, sweaty clubs and sold-out stage shows was depressed by widespread anxiety (fear-of-going-out) associated with the risk of infection.
Even as lockdown rules were gradually eased, numerous challenges remained. Policies implemented specifically to help to support the entertainment industry, such as the Eat Out to Help Out scheme (which pubs and restaurants would use to attract customers), ended up triggering a new wave of the virus and forcing the government to impose another national lockdown in the autumn of 2020. This was followed by further restrictions from January 2021, putting further pressure on entertainment venues and the night-time economy.
Only after the arrival of the vaccine did things start to look up for this type of late-night business. The rollout of vaccinations from December 2020 meant that, in time, people were able to return to their favourite spaces, with all rules eventually lifted in July 2021. By this stage, many spaces that make up the night-time economy had faced almost 18 months of restrictions on their operations.
What about rising energy costs and the cost of living crisis?
Many businesses in the night-time economy now face a new period of uncertainty. Inflation is currently at almost 10%, causing many household to cut back on luxury/non-essential spending such as streaming subscriptions or going out. As many families worry about heating their homes or putting food on the table, it is likely that splashing out on a meal at the pub or going to a concert are no longer a priority. With inflation likely to remain high over the next few months, demand for late-night activities is likely to continue to fall as real wages are further eroded.
More directly, energy price inflation is having a particularly big impact on the night-time economy. According to the ONS, UK fuel prices have risen by 11.5% in the year to December 2022. This has hit pubs hard. According to a report by the British Beer and Pub Association (BBPA) and Frontier Economics, mounting energy costs are currently the main challenge facing the industry. The average pub is expecting its energy costs to rise by 82% when the government’s industrial energy support scheme ends in April 2023. This could lead to a typical profit loss of £72,000 per venue.
For many, such losses are simply unsustainable. Around 400 pubs closed in England and Wales in 2022 (32 per month). According to the BBPA, 2,663 establishments have closed down over the past five years. The withdrawal of energy support next month could well spell the end for many more UK venues.
This issue applies to restaurants too. Taking a local example, Ben Harvey and Dom Borel –owners of the Bianchis Group, which comprises several of Bristol’s favourite venues – made a plea this week to their customers to understand the urgent need for price increases.
One of the group’s restaurants has seen its energy bills increase threefold: from £1,500 per month to £4,500. They also warn that the costs of their raw ingredients have risen drastically across the board, due in part to hikes in suppliers’ own energy bills as well as supply shortages for various products like grain and vegetable oil, a large share of which are imported from Ukraine.
What about spending and wages in the entertainment industry and wider night-time economy?
In general, ONS data show that employees in night-time industries are more likely to be low earners. In 2022, 10.5% of all employees were low paid. This figure rises to 15.1% for employees in all night-time industries and to 38.5% for employees in the night-time cultural and leisure activities grouping (our area of focus).
So, those working in late-night venues were in a vulnerable position even before the recent inflation spike began to eat into their take-home pay. People working in night-time industries are also less likely to be high earners. In 2022, only around one in six employees in night-time industries were high paid, compared with nearly one in four across the wider economy (see Figure 4)
Figure 4: Earnings by industry grouping in the night-time economy
So, employers may face pressure from their staff to increase wages in line with inflation. But due to the other cost pressures outlined above, it seems unlikely that many venues will be able to afford to do so. Diminished demand and lower revenue risks eating into profits, limiting the ability to reward workers more generously.
Looking closely at the demand side, it is possible to use card-transaction data to get a snapshot of the importance of the night-time economy. Using data from Revolut (a challenger bank), the ONS can track spending patterns for different times across a given week (see Figure 5).
Figure 5: In-person spending by day of the week, 7-14 November 2022
During the sample period here (7-14 November 2022), the restaurant and groceries groups account for 42% and 22% of spending between 6pm and 6am (‘the night’), respectively. This is followed by shopping (12%), transport (9%), travel (8%) and entertainment (2%). In total, night-time spending during this period accounted for a third of total spending. In the restaurant, travel and entertainment groups, night-time spending is above this average. Over half of spending in the restaurant group happened at night.
What these transaction data show is just how reliant the UK economy is on night-time industries. Failing to support the sector through the cost of living crisis clearly poses the risk of having a substantial negative effect on aggregate consumer demand. This could further depress GDP growth, hampering the country’s post-pandemic recovery.
Bars, nightclubs, pubs and theatres continue to face a challenging economic landscape. This ‘leisure and cultural’ sub-sector of the UK night-time economy is vulnerable, due to its inability to cut down on energy usage, pre-existing low wages, and the knock-on effects of inflation on wider consumer demand for luxury spending.
These challenges come after a difficult period during Covid-19, with lockdown measures causing venues to close in their thousands.
As the government’s energy support scheme for businesses approaches its end date, it is important that policy-makers consider this vital sub-sector. Looking at the data from both the ONS and Revolut, is it clear that a flourishing night-time economy is critical for the UK’s wider economic performance.
Where can I find out more?
- This report from the Office for National Statistics contains the latest figures for the night-time economy.
- This report by the BBPA reviews recent challenges to UK pubs.
Who are experts on this question?
- Gianni De Fraja
- Jesse Matheson
- James Rockey
- Abi Adams-Prassl