Things were going well for Mohammad Paknejad and his restaurant, Nutshell, before Covid came along.
Pre-theatre crowds lapped up his modern Iranian food in Covent Garden, the seemingly permanently busy heart of London’s West End. Six months after he and his wife set up business in mid-2019, good reviews and happy customers meant he was turning a modest profit.
Then the pandemic struck. Instead of serving customers, Nutshell was negotiating with landlords, suppliers and creditors.
“We kept the business afloat, but it was incredibly painful trying to come to agreements with everyone, especially as we didn’t know what was coming later,” Paknejad says.
“With every government announcement even after reopening on 4 July there was another setback – the rule of six, the 10pm curfew, the ban on mixing households. There was another lockdown, we reopened in December then two weeks later had a third lockdown.”
As restrictions ease again for what will hopefully be the last time, the big question is whether or not customers will return.
Nutshell has reopened for indoor dining but without theatregoers buying early dinners, and a lack of the passing traffic which gave Paknejad one-third of his customers before Covid, things are difficult.
“We have relatively good bookings for this week, but there is no footfall in the street. We barely have any walk-ins,” he says.
“I don’t think it will get any better before autumn. Last summer London was really quiet.”
With its reliance on the West End, city centre shoppers and tourists, Covent Garden is perhaps likely to be a laggard as the recovery gets underway. All the signs suggest Britain’s economy is rebounding as businesses such as Nutshell reopen.
In the first few days of indoor dining, OpenTable numbers indicate pubs and restaurants nationally had more customers than they did in the pre-Covid era, though sites in the capital are struggling more.
Businesses overall are increasingly optimistic, throwing open their doors and bringing staff back off furlough.
But there are also reasons to be cautious. What if this is merely a quick burst of pent-up demand as people buy things they could not access in lockdown, then hunker down again?
After a flurry of reopening activity in April, retail footfall has turned distinctly flat. High street shops are still drawing in only two-thirds as many customers as they did in 2019, according to Springboard data.
A survey from PwC indicates households are nervous, potentially threatening the rebound’s pace.
More than four-in-five are concerned about rising unemployment, while 80pc have worries about day to day living costs. More than three-quarters fear low economic growth, while the public also expect to reduce the number of times they go out in the evenings to social events and leisure facilities compared to before the pandemic.
By contrast 77pc of chief executives expect the economy to improve, while 89pc are confident in their company’s profitability.
An Ipsos survey for the UK Consumer Insight Panel also suggests the pandemic may have a lingering effect on families’ financial plans.
Over the last 20 years, the study has found that individuals are increasingly likely to agree “the important thing is to enjoy life today, tomorrow will take care of itself” – indicating a greater willingness to spend than save.
But the Covid crisis seems to have reversed that trend, ushering in a new age of caution. In particular, older Britons tend to disagree.
This has worrying implications for the recovery, says Mike Brewer, chief economist at the Resolution Foundation.
“It is concerning if you are in hospitality, leisure or tourism because it is older people who are more likely to spend money in these areas,” he says, with youngsters’ jobs relying on the spending.
The degree to which consumers choose to spend or save is key to the pace and extent of the economic recovery.
This year’s growth forecasts have been upgraded by the Bank of England in part because it expects households will spend, over three years, roughly one-tenth of the £150bn or more of extra savings built up in the pandemic, and that they will save around 6pc of their incomes in future – towards the lower end of historical levels.
By contrast, the National Institute of Economic and Social Research (NIESR) estimates families will keep saving around 10pc of their incomes, which is more than they usually held back pre-Covid.
Each percentage point in the savings rate amounts to around £15bn of spending, NIESR estimates, so four points of extra saving means £60bn less spending.
Even accounting for the share of money going on imports, it still knocks £34bn from GDP.
So far evidence suggests there is indeed some caution over socialising, according to Raonull MacKinnon at budgeting app Money Dashboard.
Spending in pubs has rebounded and is close to 100pc of pre-Covid levels, he says – but this does not necessarily signify exuberance.
“If the economy was in a very healthy position we would have anticipated, with the new freedoms, that people would have been spending at two or three-times their old level, at least for a brief period,” he says.
“Perhaps it is a weather thing and it will come back. Or perhaps people are a bit more cautious and aware of the fact their incomes might decline in the next few months.”
Change in tactics
Working habits are important too.
Matt Grech Smith runs the Swingers crazy golf sites, which typically used to rely on attracting an after work crowd during the week, and families and friends enjoying days out at the weekend.
Advanced bookings indicate weekends will return to normal the fastest, while the persistence of home working keeps office staff away on other days.
But he has come up with a way to make the most of the remote working trend.
“If you are a business which doesn’t have an office but wants to get the team together for meetings and presentations, we can offer a private room, lunch and equipment,” he says.
“Then come 5 or 6 o’clock when you’ve done your work you can have cocktails and the crazy golf.”
His innovation is an example of what Mohammad Khan at PwC expects to see at businesses across Britain, with companies changing strategy to lure in customers even as working habits change and households appear keen to save more.
“People have got into the habit of saving more, doing more in their community, and shopping more locally,” he says.
“This has got profound implications for businesses. If you are a local family-owned business, should you have an online presence? Absolutely. But you should shout more about what you do locally? Yes you should.”
One example of that is Top Cuvee, a restaurant in Highgate, north London.
When Covid struck the site became a retailer, initially to clear the stock of wine in the cellar.
“Retail was the only option. Initially we needed to pay the team, the rent, and the suppliers,” says co-founder Brodie Meah.
“We put it out on Instagram and the response was overwhelming – we were crazy busy. That led to a funny situation where we said, ‘hang on a minute – we’re going to have to get more stock’.”
As demand grew they started selling online, with rapid local delivery by bicycle and national next day delivery too.
Meah has twice as many staff now as before the pandemic.
“It is booming. It is 10-times over, the volume of wine we are selling now,” he says, speaking from his bike on a delivery run.
The restaurant is fully booked for its first week open. But retail means the company can balance any shaky in-person demand with online sales.
Customers have got used to staying at home in the pandemic. If they will not go to the business, the business might have to keep going to them.