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State of The UK Pub Market - Do Your Research

Updated: Mar 16, 2021

2020/NO.06 - Future forecasting is an essential feature in evaluating profits. The increased level of necessary background research is a vital piece in that jigsaw. Not unsurprisingly retail sales in March fell at their highest rate since records began 30 years ago. April looks like being even worse. There is huge uncertainty as to how far sales can still fall before they hit rock bottom. This links with consumer confidence. It is more than likely that consumers will adopt a more cautious approach to discretionary purchases and discretionary leisure spending. This then leads to what has been called by Andy Haldane, the Bank of England’s chief economist as “behavioural scarring”. In time the economy will recover but the then world compared with pre pandemic will without doubt be totally different. That “behavioural scarring” will remain.

All rather depressing but a dose of reality MUST enter the mindset of future forecasting in the on-trade throughout the leisure industry. The essential financial support that has been offered by Government to keep small businesses alive (as far as it goes to date) will have a consequence of tax rises both to recoup that debt but also to reward the NHS staff with well deserved higher salaries. Future disposable income will be squeezed as a result. Income lost during the lockdown, even with furlough assistance will stretch home finances to continue to pay off mortgages and credit cards. The safety net of savings-if there are any- will be raided to keep households afloat. Holidays both staycation and abroad when the lockdown is lifted, will be looked at long and hard and probably put off for at least a further year. Big ticket purchases will be put on hold.

The habitual use of the pub “just slipping out for a pint, won’t be long” has been severed. Old habits do die hard but once forgotten linked with social distancing when will they return? When pub visits are allowed to return it will be off a lower base with the over 70s who were solid drinkers, being even more cautious despite social distancing. Will the enlarged use of take away food from a pub change the habit of eating out in pubs and restaurants?

All very disturbing and wholly negative. But essential not to underestimate the key stepping stones to forecasting future profitability linked to setting a sensible rental level. This must be custom built around each individual case study. There is no “one case suits all”. The previously helpful British Beer and Pub Association (BBPA) guide to running a tied pub has no less than nine different case studies. Do not forget that the statistical evidence collated from the financial records and balance sheets of the BBPA members are all well out of date. That data being used can include balance sheet information that is up to eighteen months prior to the issuance of the current 2019 latest guidance! We think there should be further much more up to date refinement of those statistics to reflect current reality, not least by an age demographic reflecting the level of ‘vulnerable’ pub usage. The use of the BBPA statistical evidence as a cross check to the content of a Rent Assessment Proposal is, sad to say, a thing of the past.

It all comes down to doing very careful and current background research. This is not an attempt by Morgan & Clarke to “set the market”, but to reflect reality as it changes week by week.


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