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New data from commercial real estate analysts Altus Group has revealed that pubs across England and Wales are closing at a rate of two per day.
With a reported 383 pubs having been either demolished or redeveloped during the first half of 2023, pub closure figures are nearly as high as they were in all of 2022.
In fact, many pub owners now consider it harder to run a pub today than during the COVID-19 pandemic, which saw the pub business as an industry amongst the hardest hit by restrictions on socialising.
The increased difficulty is down to sales not increasing to pre-covid levels, whilst overheads have significantly risen.
Myerson’s Hospitality and Leisure team previously explored how the COVID-19 pandemic impacted the hospitality and leisure industry, with a particularly devastating consequence for pubs.
One year later, the industry is facing challenges, and pubs are battling a more rapid closure rate.
The rapid closure rate underscores the need for government support, innovative solutions, and collaborative efforts to safeguard the survival of these beloved institutions and preserve the pub culture in Britain.
In the post below, the team explores why pubs are still suffering a year on, as well as possible remedies and future reforms.
Soaring costs of running a pub
The costs of running a pub have soared in recent times, with UK pubs (as well as bars and restaurants) revealing that their average bills have surged by a staggering 81% over the past year.
The bills, in conjunction with the impact of the cost-of-living crisis on consumers’ disposable income, have created a huge pressure on the industry.
The pressure has resulted in diminished profit margins for pub owners and a disheartening trend of pubs vanishing at an alarming rate.
Expensive ingredients
Due to the rising cost of food, many pubs have been forced to cut down the size of their menus, choosing to reduce the quantity of their offerings rather than compromising on the quality of food.
Jeremy Hunt announced a measure to help British pubs - a tax relief of 11p on draught drinks served in pubs from 1 August following a freeze on alcohol duty.
The initiative involved an 11p reduction in tax on each pint of draught beer, larger, and cider, providing much-needed relief to both pub owners and patrons.
By implementing this measure, Hunt aimed to support the struggling hospitality industry.
Whilst the measure could not completely counterbalance the impact of inflation and high energy bills, it helped alleviate financial burdens for pub owners and made it more affordable for customers to be there, encouraging them to go to their local and contribute to the revival of the struggling sector.
High energy bills
Rising energy costs have created a significant hurdle for pub owners, who report feeling immense financial strain due to high energy costs on tight profit margins.
Earlier this year, The British Beer and Pub Association cautioned that many pubs would be put out of business should the average energy bill for a pub rise by a predicted £18,400 a year following the end of the Energy Bill Relief Scheme.
Resolve Financial estimated that a small UK pub would need to serve an extra 582 pints per month to keep the doors open against the backdrop of increasing energy bills.
With an increased awareness of sustainability and energy efficiency, pub owners have an opportunity to implement energy-saving measures to help alleviate some financial pressures.
By embracing energy-efficient technologies such as LED lighting and smart thermostats, pubs can reduce their energy consumption, lowering their bills.
Lower energy consumption helps pubs mitigate their financial burdens while showcasing their commitment to environmental responsibility in an increasingly environmentally conscious market.
Rent and property prices
The costs associated with renting or buying a pub have soared.
As property prices increase, the profit margins for pub owners are further eroded.
The rise in business rates (a tax levied on commercial properties) adds a further financial burden for pub owners.
Difficulties hiring staff
Running a successful pub requires more than simply providing drinks and food.
Meticulous management, quality service and a welcoming atmosphere are essential.
As labour-intensive establishments, pubs rely heavily on skilled and dedicated staff for these qualities.
However, pubs are not immune to the chronic staffing shortage faced by the hospitality sector.
The lack of available skilled workers has resulted in a poorer standard of customer service, longer wait times, and increased workloads for existing staff members.
Recent Office for National Statistics data revealed that job vacancies in the sector were up by 48% from pre-pandemic levels.
Pub owners must grapple with providing fair wages to recruit and retain staff whilst ensuring they can meet their other financial responsibilities.
Recruiting good teams with the correct skill set is indispensable for being able to mitigate the other challenges the industry faces.
Good communication skills should be a priority when recruiting staff, as should an ability to listen.
Those in charge of the hiring process should look out for staff who will fit in well with the team to foster a friendly working environment.
Applicants with good patience and composure can also be essential when pub shifts get busy to ensure that customers receive fantastic customer service.
Is there anything pubs can do to weather the storm?
The Federation of Small Businesses (FSB) is urging the government to extend the 75% rates relief discount for retail, hospitality and leisure businesses beyond next spring’s cut off and to increase the threshold for small business rates relief from £12,000 to at least £25,000.
Currently, pubs and other eligible hospitality, leisure and retail businesses get a 75% business rate discount for the 2023/2024 tax year, up to a cap of £110,000 per business.
However, the discount is only set to last until March 2024.
The cries for an extension to the relief are echoed by The British Beer and Pub Association, the leading trade association representing brewers and pubs.
Practical steps for hospitality and leisure business owners
What will come of these pleas is unclear, so our hospitality and leisure team have detailed practical steps that pub owners can take in the meantime, as well as the pros and cons of each strategy:
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Practical step |
Pros |
Cons |
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Increase prices or consider dynamic pricing (as is used in industries such as aviation, hotels, and event ticketing). Stonegate Group, the owner of Slug & Lettuce and Yates’s, recently announced they will raise prices at times such as weekends to help cover costs. |
This allows pubs to improve their profit margins and helps to offset rising costs. |
With the Morning Advertiser estimating that 82% of pubs charge more than £4.00 for a pint, there is a question about whether consumers can afford further price hikes. Putting prices up could deter cost-sensitive customers. It could result in losing loyal customers who may look elsewhere for more affordable offerings. Those pubs that have already implemented dynamic pricing have been met with a cold reception by consumers who have taken to social media to vent their disapproval, branding it an “unhappy hour”. |
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Consider employee benefits that could be offered as alternatives to a pay rise, such as bigger discounts, increased amounts of holiday entitlement, or greater flexibility on working hours |
Providing creative, non-monetary employee benefits, such as flexible working hours, training and development opportunities, and employee recognition programs, can boost morale and job satisfaction, improve staff retention rates, and create a positive working environment to help attract and retain talent. |
This solution may not directly address the financial concerns that employees might have. Salaries must remain competitive so talented staff are not lost to better-paying competitors. |
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Boost marketing efforts to bring in more consumers |
By leveraging social media platforms, targeted advertising and local promotions, pubs can attract a wider audience as potential customers, increasing footfall, and ultimately driving revenue. |
There is a cost associated with marketing campaigns. Small, independent pubs may face financial constraints in implementing these marketing strategies. It is important to balance investing in marketing and maintaining profitability. |
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Sell off assets to keep the business solvent |
This can generate immediate cash flow, helping pubs meet financial obligations and stay afloat. Pubs can reduce debt, cover operating expenses, and potentially invest in improvements to attract more customers and boost revenue. |
This may result in a loss of long-term value and revenue streams. It might also diminish the appeal to customers. |
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Consider agreeing a company voluntary arrangement with creditors to continue running the pub whilst repaying debts |
It allows a pub to continue to operate (where it is able to trade profitably) by reaching agreement with the creditors of the business to compromise existing liabilities and thus potentially reduce the amount of debt needing repayment. |
It can be complex and time-consuming, involving legal and administrative costs. It could result in job losses for employees and possibly some reputational damage for the pub. |
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Restructure the business through a pre-packaged administration sale |
Working with a licensed insolvency practitioner to negotiate a transfer for proper value to a newco of the business and assets of the pub through administration can allow the business to survive and trade on. |
The process can be time-pressured, difficult to achieve where there are objecting secured lenders and will require funding for the purchase consideration and administration costs. |
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If the pub is unable to trade on solvently, consider a creditor’s voluntary liquidation to wind down the business through a formal insolvency process. |
This allows the pub’s directors to take active steps to prevent further losses to creditors and to avoid compulsory winding up through the courts by appointing a licensed insolvency professional to act as liquidator of the company, removing the responsibility of winding up the business and dealing with its assets and liabilities from the shoulders of the directors. |
The process can be financially challenging and stressful for business owners. It will result in employees losing their jobs and potential reputational damage for the directors. Careful consideration and expert legal and financial advice are crucial before deciding upon this course of action. |
Campaign to save British pubs
Campaigners are calling for the government to take action to help save British pubs by curbing their costs, in particular with regard to reforming business rates, cutting VAT, and extending energy support.
What will come of these pleas is yet to be seen.
Low sales caused by the cost-of-living crisis, increased overheads due to rising inflation, and staff shortages have created a perfect storm for UK pubs.
Beyond the financial consequences of closures for owners and employees, communities can keenly feel the loss of beloved local pubs.
Pubs have long been a place to foster social connections and host celebrations.
As they disappear, this detrimentally impacts on the social fabric of the communities.
It is hoped that the sector can remain resilient through appropriate support and investment.