Aug. 25 (Bloomberg) -- British nightclubs are closing as rising unemployment and the allure of cheap supermarket booze mean more revelers stay home.
Luminar Group Holdings Plc, the U.K.’s largest club owner, has shut at least 11 venues since February and its shares have plunged 74 percent this year. Brook Leisure Holdings Ltd., 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, in a telephone interview. “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 U.K. clubs has fallen 21 percent since 2006, a decline of 622 venues, according to CGA Strategy, a supplier of trade data to the industry. There were 2,372 nightclubs open in June, the Manchester-based 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 2009.
About 20 percent of 18- to 24-year-olds is 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 pounds ($266) in September, down 4 percent 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, is seeking to acquire bars, rather than nightclubs, in more stable areas such as southern England, Marks said. Towns in the north are “dying,” and government spending cuts and youth unemployment will hasten the decline, he said.
Luminar said in July it had 76 clubs, down from 87 on Feb. 25. It reported a record net loss of 123 million pounds for the year ended that day. The company said the World Cup soccer tournament cut admissions revenue by 26 percent in the 19-week period ended July 8. Sales fell 20 percent.
Company spokesman Matthew Smallwood said CEO Simon Douglas and Finance Director Philip Bowcock declined to be interviewed.
“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 Plc. “If a club is empty for one week, no one will come back the next.”
Fabric was removed from administration in June after being bought by a group led by investor Gary Kilbey. Matter, Fabric’s 2,600 capacity sister venue located next to the 02 Arena in Greenwich, London, has been closed since June. It opened in September 2008. Admissions at Fabric have declined by as much as 10 percent this year, said Leslie, who co-founded the 1,700 capacity club in 1999.
79p a Pint
Inexpensive alcohol sold at supermarkets has led more young people to drink at home and spend less on going out, Forsyth said. A pint of lager costs 79 pence at Tesco Plc, based on a four-pack of own-brand beer on its website. Revelers pay as much as 6 pounds in a city center nightclub.
Little more than half the alcohol drunk in the U.K. is now consumed in pubs, down from 88 percent in 1979. In 2009 pubs closed at a rate of 40 a week, according to the British Beer and Pub Association in London.
Nightclubs are also facing more competition after a change to the licensing laws in 2003 allowed more pubs to stay open longer, Marks said.
The combination of negative factors has created a “perfect storm,” he said. “There are still too many clubs.”
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