Payroll and energy costs cut pub profits

A leading trade body has revealed the true cost of running a pub is higher than expected and on the rise - leaving operators feeling the squeeze on their profits.

The Association of Licensed Multiple Retailers (ALMR) has found the average cost of running the average pub has risen to just over 60% of net annual turnover.

The results are illuminating - they suggest that the costs are far more significant than most people would assume, and certainly more than most accounting practices allow for.​Nick Bish, ALMR chief executive.

The figure comes from the ALMR's Benchmarking Survey, released today at the Association of Licensed Multiple Retailers' annual conference.

It is significantly higher than the figure used by most pubcos to calculate operating expenses.

The survey of managed multiple operators was carried out in February and replies were received from 39 companies, between them covering 12% of all managed outlets in the UK.

Operators said the biggest single cost was employment - with salaries and wage costs amounting to a whopping 27% of turnover - and respondents confirmed the substantial increase in utility charges - now amounting to over 4% of total operating costs.

More money is also being spent on door staff and other compliance requirements as businesses respond to the challenge of responsible drinks retailing.

Nick Bish, ALMR chief executive said: "These findings reveal for the first time the true cost of running a pub in the UK.​

"Our survey looks at where small managed multiples get their money and how they spend it.

"The results are illuminating - they suggest that the costs are far more significant than most people would assume, and certainly more than most accounting practices allow for.

"And with the survey suggesting like-for-like sales up only 3.7%, it's easy to see how the impact this will have on business margins.

"It's also gratifying to see how licensed retail is getting to grips with its responsibilities under the CSR agenda, but this is by no means cost-free. Government should applaud the industry cash spent on this issue and relax compliance costs elsewhere."

The findings also showed a significant difference in cost structure for different styles of trading operation.

Whilst the average cost of running the average pub exceeds 60%, it ranges from 56% for community pubs to nearly 70% for clubs and wine bars.