Hard times a drag on UK club scene

Photo / Herald on Sunday

British nightclubs are closing as rising unemployment and the allure of cheap supermarket booze means more revellers stay home.

Luminar Group, the United Kingdom's largest club owner, has shut at least 11 venues since February and its shares have plunged 74 per cent this year.

Brook Leisure Holdings, a company running clubs in northern England, was forced to close two clubs and a bar during the past four months.

"This year has been particularly tough," said Cameron Leslie, co-founder and managing director of London clubs Matter, which has been closed since June, and Fabric.

"Undergraduates are not finding jobs, creating a huge strain on our core target market."

Dwindling disposable income during the recession has left nightclubs, which typically charge an entry fee, relying on cut- price tickets and drinks promotions to keep hold of partygoers.

The number of UK clubs has fallen 21 per cent since 2006, a decline of 622 venues, according to CGA Strategy, a supplier of trade data to the industry. There were 2372 nightclubs open in June, the company said.

"It has been happening for the last five or six years but it has been accelerated by the recession," said Jonny Forsyth, a drinks industry analyst at Mintel International in London. "Suddenly, young people have no choice but to stay in."

In 2008, Britain plunged into its longest economic decline since World War II as banks were beset by a shortage of money and a boom in the housing market came to an abrupt halt. Gross domestic product shrank for six consecutive quarters, emerging from recession in the final three months of last year.

About 20 per cent of 18 to 24 year olds are unable to find work, according to data from the Office for National Statistics. Unemployment in that age group rose to 724,000 in the second quarter from 719,000 a year earlier.

Average weekly household income after essential costs, such as food and utility bills, will be £171 ($377) in September, down 4 per cent from a year earlier, according to the Centre for Economics and Business Research.

"When the economy is tight, punters always look for value," said Peter Marks, chief executive officer of Brook Leisure. "Nightclubs traditionally get their income from door revenues and charging more for drinks."

Brook Leisure, which runs 15 nightclubs and bars mainly in the north of England, was seeking to acquire bars, rather than nightclubs, in more stable areas such as southern England, Marks said. Towns in the north were "dying" and Government spending cuts and youth unemployment would hasten the decline.

Luminar said last month it had 76 clubs, down from 87 on February 25. It reported a record net loss of £123 million for the year ended that day.

The company said the World Cup soccer tournament cut admissions revenue by 26 per cent in the 19-week period ended July 8. Sales fell 20 per cent.

"No one likes going to empty nightclubs and cutting admission prices to attract customers indicates you're in trouble," said Simon French, a London-based analyst at Panmure Gordon and Co.

"If a club is empty for one week, no one will come back the next."

Fabric was removed from administration in June. Matter, Fabric's sister venue located in Greenwich, London, has also been closed since June. It opened in September 2008.

The combination of negative factors had created a "perfect storm", Marks said. "There are still too many clubs."

- BLOOMBERG