Triple whammy for tenants
The smoking ban, the worst summer on record and falling consumer spending have crippled tenants' profitability during the past 12 months. Graham Ridout reports
The Morning Advertiser's state of trade survey reveals just how difficult trading conditions have become for many licensees. The triple hit of the smoking ban, the worst summer on record, and dwindling consumer spending has had an unprecedented impact on the industry.
The chilling statistics reveal that over the past year, 10% of those responding to the survey are running pubs that are either making a loss or no profit at all. In tough
times, it was creditable that 29% reported an increase in profits. But 69% reported that profits had decreased.
The average profit per pub dropped nearly 15% compared with the previous year to stand at just over £24,000. Equally depressing is the general feeling that the coming year won't be any better, with 54% expecting a further decrease in their profits.
Pub turnover is also waning, with the figure down nearly 2% to an average of £287,800. This decline would have been significantly steeper but for above-inflation price rises levied by brewers that lifted turnover.
Licensees are also bracing themselves for a tough year ahead, with 51% anticipating a further drop in turnover.
The smoking ban is blamed by 57% of respondents for having the biggest impact on trade — three times the number (19%) who cited a slow-down in consumer spending. Bad weather (13%) and prices rises (11%) were the other two factors affecting trade.
Even licensees who didn't cite the ban as having the biggest impact on their business agreed they had lost trade as a result. Only 19% reported that the ban had a beneficial effect on their trade.
The barrelage figures of our respondents was actually down less than the market — 3.9%, compared to industry figures of 8% to 10%. The average pub now has a barrelage of 295. More than half (52%) of landlords fear the figure will drop further during the next 12 months.
The tightening financial climate is being felt acutely in licensees' ability to retain staff, with 57% admitting to laying off staff during the past year. At pubs where redundancies have had to be made, an average of 2.75 employees were laid off.
Another factor dampening operators' spirits is the perceived lack of assistance from their pubcos. More than half (53%) had sought help, but nearly six out of 10 (59%) reported their pubco's response as "unhelpful". Only 8% described their pubco as "very helpful" in assisting them with their plight.
Unsurprisingly, business development managers (BDMs) bore the brunt of criticism. Almost seven out of 10 licensees (68%) claimed their BDM was "not at all creative" in providing business ideas to help build trade. Worryingly, only 3% of licensees thought their BDM was "very creative" in providing possible solutions to help their business.
The biggest gripe concerned the price levied by pubcos for drinks, with 53% saying that better product discounts would alleviate some of their pain. A further 29% wanted a rent review, while 19% sought improvements to the interior or exterior of their pubs.
