20-April-2008 Times Online - Closing time for Britain's public houses
Four pubs are shutting down each day as licensees give up the battle against cheap supermarkert beer and falling trade
He never thought it would come to this. After 30 years, Richard Sewell is packing in the pub trade.
For the past five years he has been the licensee at the Park Inn pub in Hartlepool. This week he is handing the keys over and letting somebody else have a go.
“I was going to run this place for a few years, sell the lease and retire,” he said. “But it’s gone completely the wrong way. I’ll be lucky to get out without having gone bankrupt.”
A combination of cheap beer in supermarkets, rising costs and alcohol duty and fewer customers because of the smoking ban have taken their toll on thousands of British pubs.
The British Beer & Pub Association estimates that four are shutting down every day and that the rate of closures is 14 times faster than in 2005. There are just over 57,000 pubs in Britain today, compared with 69,000 in 1980.
The village pub is vanishing, hit by increasingly tough drink-driving laws; beer sales have not been so low since the depression of the 1930s. Many publicans, like Sewell, have become so demoralised they are calling time.
Andrew King, who runs the King’s Arms in Ely, Cambridgeshire, returned to the pub trade after 22 years in the army. He wishes he had not bothered. “It’s extremely difficult,” he said.
King’s lease has been up for sale since the turn of the year, and there has been scant interest from prospective buyers.
Chris Unwin, who owns four pubs in and around Plymouth, had to inject £250,000 into the business to keep it going after last summer’s bad weather and rising costs. He said that the rates at one of his outlets had shot up from £13,000 to £21,000 in a year.
“The whole industry is going to implode,” he added. “Behind the monarchy, the pub is one of the great things in this country. If you lose that, you lose everything.”
Most people in the business blame the government, which, they argue, has done nothing for the pub industry. The chancellor’s recent decision to raise duty on beer by 4p is the final insult. British beer is already the highest taxed in Europe.
This is one reason why pub-goers have stopped going out two nights a week, according to Ian Payne, chairman of Laurel, the managed-pub group behind the Yates and Slug & Lettuce chains. Friday night down the pub is no more; instead it’s Friday night down the supermarket for cheap lager (58p a pint instead of £2.85) and fags, and then back home to the telly.
Payne said: “The industry has lost a night and it tends to be Friday. People still want to go out one evening a week, but they have chosen another night to stay at home, drink lager from the supermarket and smoke.”
The licensees’ real wrath, however, is reserved for the companies, such as Enterprise Inns and Punch Taverns, that own the freeholds to their pubs. There is even an attack website, Punchsucks.co.uk.
These businesses charge tenants a rent and sign them up to beer-supply contracts. Tenants say rivals not tied to one of the pub companies can buy beer cheaply and charge drinkers less. The tenanted pub, it is claimed, is forced to charge higher prices to meet the bigger cost. This creates a vicious circle: as trade deteriorates, money for improvements becomes scarce.
Jerry Hudson, who runs The Farmhouse pub in Horley, Surrey, said: “[The tenanted pub groups] don’t pass on the discount they get with their buying power to the tenants.” Another licensee said: “They want their pound of flesh.”
The tenanted-pub companies grew up following the Beer Orders, the ruling in 1989 aimed at ending the control of pubs by the big brewers.
Companies such as Enterprise and Punch, snapped up the vast pub estates while the derestricted market led to the creation of new businesses such as JD Wetherspoon. Over the past decade and a half, the “pubcos” have become the country’s biggest landlords. They have enjoyed the benefits of the rising property market, with pub valuations climbing. This has enabled them to raise huge amounts of money on the debt markets, giving them the fire-power to invest in acquisitions.
They have also trimmed their estates to offload “bottom-end” pubs they saw as unviable, which have been snapped up by other investors looking to create their own pub empires.
The tenanted-pub group's dominance has given them a powerful position, but in recent months pub companies of all stripes have faced tough market conditions. This is the first time these companies have traded through a heavy consumer downturn.
Even the behemoths are not immune. Enterprise Inn's annual profits, published in November, were 4% down on the previous year.
This Thursday, Punch will deliver its interim figures, which are likely to be unshowy at best. Analysts at Dresdner Kleinwort predict a 5% fall in pre tax profits but think the numbers will be “solid”.
Mark Brumby, leisure analyst at Oriel Securities, said: “These companies have been used to doing business in a buoyant economy, with benign interest rates and a buoyant property market. All of that has gone. They are having to deal with a brave new world.”
Pub owners say the onus is on tenants to rise to the challenge. Ted Tuppen, chief executive of Enterprise Inns, said: “The pub industry is experiencing greater pressure than in the past. What this means is that pubs have to be even better to continue to perform well.”
Both Enterprise and Punch deny being unsympathetic to their tenants’ plight. Tuppen said: “We are working harder than ever to support licensees who are working hard to help themselves.”
He said the company invested about £70m on capital expenditure on pubs last year and would do so again in 2008.
For disillusioned landlords, this is cold comfort. King said: “I don’t think the pub company is being sympathetic. All they’re interested in is getting their hands on the money.”
For a publican, “working harder” usually means serving food. “You’ve got to be doing food now, or you’re dead,” said Payne.
Pubs now account for about 23% of all meals served outside the home. Pub operator Mitchells & Butlers serves 107m per year. At a trading update this month, comparable sales were up just 0.6% but food sales were ahead 4.8%.
At Punch’s Spirit division, like-for-like sales were down 2.2%, according to a January update, but would have been worse but for food sales improving 1%. Marston’s said its food sales were up 7.8% for the 24 weeks to March 15.
Some executives argue, however, that food is not the answer for everybody. Many pubs, they point out, are ill-equipped or too small to offer better food, even if the landlords wanted to do more.
This is particularly true in the countryside, where the Campaign for Real Ale is trying to ensure that the pub does not go the same way as the village post office. Pub Is The Hub, set up with backing from Prince Charles, also tries to help communities save their pubs.
Success stories include The Black Swan in Ravenstonedale, Cumbria, which gave over space to open a shop selling local produce, and the Blacksmiths Arms in Market Rasen, Lincolnshire, which began doing the catering for five local primary schools.
Many others have been sold for their property value. The village of Speldhurst near Tunbridge Wells in Kent used to have two lively pubs.
Now one is a private home, and the other is a restaurant with bars, owned by a chain. There are few winners in this pub war. While the noisy high street bars can fall back on their binge-drinkers, in the quieter backwaters, a national institution is vanishing, and the pub companies’ business model seems unable to save it.
PUB QUIZ: TEST YOURSELF
What is the most common name for a pub in Britain?
The Red Lion. (The Royal Oak is the second most common.)
How many pubs are there in the UK?
About 57,000
What percentage of beer is bought in pubs?
Roughly 50%. It was as much as 95% 30 years ago.
Who first made pubs put signs up, indicating their status as alehouses?
Richard II in 1393
What is the oldest pub in Britain?
This is the subject of some debate, but claimants to the title include Ye Olde Trip to Jerusalem, in Nottingham, and Ye Old Fighting Cocks in St Albans.
How many people drink in pubs?
About 15m people visit a pub at least once a week.
Which is Britain’s biggest pub company?
Punch Taverns. It has more than 8,400 outlets. Enterprise Inns is the second largest with 7,800.
How much did the chancellor add in duty to the price of beer his most recent budget?
4p per pint.
And of landlords surveyed by the trade magazine Morning Advertiser, how many support a ban on the chancellor entering any British pub?
80%.