W(h)ither Britain’s pubs?

Is coronavirus killing the British pub? On 16 March 2020 Boris Johnson advised the public to “avoid” them and since then we have faced three national lockdowns when patrons had no choice but to follow the Prime Minister’s stricture.

As a result data last week from CGA and AlixPartners showed that almost 10,000 licensed premises had closed permanently in 2020.

Twice as many venues (including restaurants, hotels and bars) were shut as new ventures opened despite a raft of government initiatives, grants and subsidies to keep the sector afloat.

While the VAT cut to 5% on food and soft drinks was widely welcomed, as was August’s “Eat Out To Help Out” discount scheme, other attempts to buoy the sector have been widely criticised as being too little and too late.

Now with speculation intensifying that restrictions may not be lifted until May, the British Beer & Pubs Association is in no doubt about the depth of the crisis.

“These figures show what a devastating year 2020 was for pubs”, says chief executive Emma McClarkin.

“Our sector is far from out the woods yet and it continues to fight for its very survival through the pandemic in 2021. We fear things could actually get much worse before they get better for our pubs and brewers.”

One of the biggest pub groups, JD Wetherspoon, says it has been spending £4.1 million per week while its 872 pubs are closed. The company has twice raised capital from shareholders  during the pandemic to bolster its finances.

Elsewhere, villagers have been crowd-funding their locals to keep them above water until reopening and many pubs have resorted to takeaway catering ventures as a source of income; but the majority are firmly shuttered for the duration, trying to survive on handouts, furlough payments and the waiving of business rates until restrictions are lifted.

“Pubs are the heart of our communities and have a vital role to play in the economic recovery”, says McClarkin. “If they are to survive the current onslaught they face they need backing from Government.

“This means grants delivered to them immediately before it’s too late. It also means reopening properly along with a stimulus package that helps pubs to thrive including extensions to the Business Rates holiday and VAT cut, as well as a beer duty cut.”

All eyes are on Chancellor Rishi Sunak’s Budget on 3 March this year.

The licences’ plight is heightened by fears that during the past year of enforced closures many Britons may have lost the pub-going habit.

Trading figures from the supermarkets are ringing alarm bells. As the drinks business reported last week, weekly wine sales at Waitrose are a third up on last year while beer sales have risen by 49%.

Spirits in particular seem to be the lockdown drink of choice, with Waitrose reporting a 64% increase in rum sales and a 56% jump in Tequila business. At other supermarkets, sales of cream liqueurs such as Baileys have doubled.

This is especially irksome to the on-trade, which since mid-December has been barred from selling alcohol to accompany takeaway food.

The Waitrose figures echo the trend in the United States where off premise sales have soared as drinkers changed their habits in the face of bar and restaurant closures to beat the pandemic.

Now publicans are wondering how many former customers will come back through the saloon bar doors once they are reopened? 

The character of the pub when it reopens may have been changed by coronavirus (will standing at the bar return?) but some see opportunities in the wake of Covid-19.

When it raised £93m earlier this month Wetherspoon went out of its way to say that some of those funds would “facilitate the acquisition of new properties, which are likely to be available at favourable prices, as a result of the pandemic”.

In other words, it is looking to swoop on previously profitable sites where the government’s aid packages have come too late and been too little.

It is targeting pubs in central London, which have been particularly hard hit due to the loss of tourist traffic and the absence office workers. Many of them have also been closed for longer than rural pubs because they cannot meet social distancing criteria.

Nor have small pubcos or single licensees the financial resilience to survive much longer compared with a stockmarket favourite with a proven track record of making money and the ability to raise extra funds.

“It may be possible to achieve a higher-than-average return on capital on properties acquired in the next few years, based on the company’s past experience,” Wetherspoons said.

Similar calculations are driving former Greene King chief executive Rooney Anand. He has formed Redcat Pub Co which has funds of up to £200m and is backed by US investors.

Insiders say, however, that he is targeting smaller outlets and thus will not be in direct competition for the bigger pubs that fit Wetherspoon’s identikit.

Over the past decade of diminishing pub numbers one simple fact has stood out. Where two nearby pubs (especially in a village) have fought for limited custom, closure of one often has been the salvation of the other as it has picked up some (but by no means all) trade from the one that went under.

Whatever Sunak produces from his red box this March will not be enough to save Britain’s entire remaining pub estate. Just as drink-driving legislation and the smoking ban hastened the demise of many pubs, Covid-19 is having a radical effect on the sector.

But it will adapt and survive.

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