Recession: how was it for you last time?

By Penny Barratt

- Last updated on GMT

Related tags Pubs Recession Public house Late-2000s recession

Recession is upon us
Recession is upon us
Have we seen it all before? Or is this period of economic challenge distinctly different from the dark days of the 1990s?

Have we seen it all before? Or is this period of economic challenge distinctly different from the dark days of the 1990s? Penny Barratt asks six industry experts who have weathered previous storms.

Barry Gilham, Fleurets chairman, age 60

I started at Fleurets in 1964 and I can remember a recession each decade from the '70s onwards. Normally recessions come round every 10 years or so — we just got away with it for longer this time. The industry is cyclical, too. In 1973, breweries were transferring tenancies to management, then the pendulum swung back. By 1992 a lot of managed houses were being switched back to lease. The difference is that the banks cut back on lending in 1992, whereas now they just don't have any money.

Sixteen years ago, the market traded through in terms of selling pubs — although in Brighton, for example, we didn't sell a single freehouse for 12 months, we were selling for receivers and banks. But that was balanced for us by selling 500 properties for Vanguard who did what Spirit has been doing in transferring them from managed to lease.

As for recovery, we just have to run twice as fast to stand still. We're making a profit — just enough to buy a Kit Kat, but at least it's not a loss. There are a lot more properties on the market and prices are lower. With around 50% of deals falling through, we have to concentrate on those that are really going to happen and try to get at least half of them through. It's a case of flight to quality for pubs and agents.

Licensees, too, have to be at the top of their game: accounts in order, VAT up-to-date or it won't be sold. Lots of them fall through because of the state of the decoration. Maybe instead of being behind the bar they should be out there painting the front, clearing away dead flowers and brightening up their image.

Bob Ivell, former Regent Inns executive chairman, age 56

In 1992 it didn't feel like a recession to me. I was MD of Scottish & Newcastle, buying 1,600 pubs from Grand Met — they hadn't been loved, but there were great sites and opportunities to grow.

The big difference now is the industry structure. Before, there were big breweries with freeholds: they had less debt and more secure balance sheets. We didn't lose pubs. Now after 10 years of financial engineering companies have high levels of debt. Now, with smaller companies around, more pubs are reliant on individuals. We will lose pubs.

And the banks are under so much pressure. I think this adds a different perspective for consumers — it makes them stop in their tracks. In the 1990s they might not have heard of Iceland, never mind Icelandic banks — now you've got entrepreneurs who borrow and individuals who save with them.

What is interesting is how recessions can change social habits. Up to and during the 1980s, eating out was expensive, so in the recession in the early '90s, people gave it up quickly. Pubs then brought down prices, prices stayed low, and eating out became a way of life. Now people are reluctant to give it up. It's more competitive than ever at the value end, but you still have to remember that, though growth's not there, there's still a market. There's still 80% of people to target, so go hard and do it better.

But I do think this is the worst I've seen in my career. What will lead us out is always consumer confidence — we will see a reduction in supply, but sound economics and high quality will be the key for those who survive.

Colin Wellstead, ex-head of pubs at Christie+Co, age 58

In the early '90s the industry was coming down from a high after the 1989-90 boom. But last time it definitely took time to spread throughout the country. The recession started in the south-east and rippled outwards — our Scottish office felt it 18 months later.

We had administrations and receiverships in much the same way as now with sharply falling values. Individuals lost a lot of equity — a pub we might have valued for £300,000 in 1990 would have sold for maybe £175,000 just two years later. Allied Irish was the bank that lent very heavily to pubs at that time, and it took a big hit.

Christie+Co were the biggest agent in the sector but we shrank significantly and closed a couple of offices. Some of the competition didn't make it — for example, Druce had seven or eight offices but it didn't survive.

Some agents do well in the good times but a lot of people out there haven't lived through a recession before. In the '90s we were one of the first to react in terms of cutting costs and introducing pre-paid ads. Now it seems agents are once more considering charging for advertising to cover some costs.

Licensees were having a tough time before this downturn and pubcos need to offer support. But I believe there were too many pubs in the last recession and too many now. Far fewer pubs are being opened than shut — one agent reported that a third of all freehold licensed outlets it sold in 2008 were for alternative use. But life will carry on and pubs do still sell — you just have to be careful about the pricing.

Gary Landesberg, Admiral Taverns owner, age 48

In the early '90s I was in commercial property, buying plots of land for residential and doing residential conversions. The bottom of the market in terms of property had probably hit around 1989, so by 1992 we had reached the start of what was the recovery period. The bottom of any market can be positive if you have cash.

The biggest change this time round is obviously the lack of liquidity. We've never, ever seen anything like this, with Libor rates 160 points above base. It's unprecedented. You can't compare this recession to anything else. There has to be light at the end of the tunnel or else there is no point in carrying on — but there won't be any light for at least two years. The banks must sort themselves out over the next 12 months but they're under such constraints that liquidity will be slow to return. You have to take each week as it comes and face up to it — you can't beat it, you just have to ride the waves, watch your costs and run the business a lot harder than when it's flying.

Ian Payne, Bay Restaurant Group & Town and City Pub Company chairman, age 55

At the time of the last recession I'd just started as director of corporate change at Bass Taverns. After the Beer Orders, Bass was splitting into two, part of which formed the basis of Punch Taverns and the managed business, which was having a tough time. I was running the leasing company and just sailed through the recession. There was uncertainty, but it was more to do with whether pubs were going to be tenanted or managed, not because of job losses.

In 1992 there was certainly a lot more fat you could cut. We also had a far greater spread of business — free, tenanted, managed, breweries — you could always make up losses somewhere. Now we have a limited range of offers it makes companies more exposed: there's nowhere to hide.

The main difference between then and now is that performance was predictable then — you might be 3% to 4% down each week, but you always had a good idea where you were going to end up.

This time there is incredible fragility in the market. It can be good on Wednesday, Thursday and Friday and then, for no reason we can pin down, the week collapses in one night.

There are lots of reasons — consumer confidence, yes — but most of Town & City's business comes from 18 to 25-year-olds who haven't been affected. The smoking ban still impacts if it's a weather-based offer, as do coffee shops and the anti-pub crusade, but frankly they are all part of a predictable longer-term trend. In 1992 I could have told you today what we would do by the end of the week, but I can't do that now.

It's a case of literally battening down the hatches on costs and capital expenditure and promoting aggressively to take money from your competitor. I'm telling pubs not to put on Sky News because it's so depressing: watch the racing, anything. But ironically we're in a lot better positi

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