914 pubs closed in 2018 alone.
This has been a troubled sector over recent years due to many factors including the smoking ban in 2007, changing consumer behaviours with more younger people than ever before under 24 years of age not drinking at all, and rising alcohol prices sparking the trend of 'pre’s' with people drinking cheap, shop bought alcohol before going out.
The above issues in the sector have been magnified by:
• Extortionate business rates increases
• Increasing cost pressures (minimum and living wage rates and auto-enrolment)
• Margins being constantly squeezed
• Climate change impact increasing with worsening inclement weather patterns
Despite the above hardships, the rate of pub closures has halved in the first half of 2019 with only 235 closing in the first half of the year. That, coupled with more budget chains increasing pubs (J D Wetherspoon’s has 212 more pubs since 2007 and turnover has increased from £889 million to £1,694 million in the same period) and there being 4,550 more independent pubs than 10 years ago reveals an improving trend at both the top and bottom end of the market.
The growing, more entrepreneurial owners have seen a gap in the market for those:
• Offering better, more sophisticated food and drink options
• Increase in craft beers, ciders and vegan/vegetarian food options
• Micro-breweries increasing
• Cashless pubs reducing staff numbers and loss of revenue
The more successful pubs have also benefitted from Brexit woes which has been fuelling the “staycation” trends and a wave of tourism caused by the devaluation of the pound. Those with letting rooms in particular have done well with more people choosing to holiday in the UK.
Even the recent wave of high street, retail Company Voluntary Arrangements have helped keep the pressure on landlords and breweries to keep rent increases to a minimum.
At the lower end of the market, people with less money to spend still want a night out and some of the chains offering drink and food deals have done well.
Conclusion
I believe that 2020 will be a strong year for the budget end of the pub trade along with those more entrepreneurial, independent pub owners. Those situated in the middle ground, with no good food or live music offering will prove to be the collateral damage.
However, another wet summer can make or break this sector.
Mark Roach is a restructuring and insolvency specialist; his expertise includes dealing with a range of businesses facing financial challenges as well as providing advice to directors and shareholders in the solvent winding up of the businesses. His sector experience encompasses hospitality and leisure, information technology, service-related industries, manufacturing, printing, professional services and care homes.
