A look at the current pub business

The report shows that life for Britain’s pubs and bars in looking up, despite the increase in taxation, the production of cheap supermarket alcohol and the sad economic status. Capital expenditure has gone up by 66% in the last year due to an increase in investment by pub owners. The like-for-like sales have gone up by 5.8% up to October 2012, and CAMRA has seen increased membership.

The Association of Licensed Multiple Retailers has released a Benchmarking Report which shows an increase in consumer confidence in the pubs, and the economic regeneration has increase pub patronage. Pub insurance has also helped in bolstering this aspect, by giving investors more confidence to invest in the pubs, and also in hiring of better qualified staff members.

Community locals and food-led outlets are leading in the industry, and this gives credence to the government’s assertion that the industry is strong and can create more jobs, invest in facilities for the community and play a crucial role in the larger society.

The smaller, community pubs are out-performing others in the market, meaning that they are the mechanism behind the growth in the industry and are the best measure of business and consumer confidence. Pub owners want the prohibitive taxes reduced and the red tape associated with the industry removed so that they can achieve their full potential.

The report, which benchmarks operating costs, market trends and business performance, says that community pub owners have seen an increase, outperforming the market in like-for-like sales by 7.6%. Operators who have tied leases are still struggling, with below average Capex margins and growth. The tied rents as a percentage of turnover, for the second time, were higher than those for free-of-tie and commercial leases.

For the first time in 4 years the average cost of running a pub had increased to just less than half of turnover, making matters worse. The figure stands at 3% to 48% of turnover, and a 10% increase in rents for the leased sector. General operational matters, payroll, and legislation are responsible for this increase in costs.

Business profitability relies a lot on cost control, and this is more so in the pub sector, where it plays a key role in rent and valuation calculations. At the height of the recession, operating costs had gone up to 51% of turnover, before they stabilised for the last three years.

Although the report shows that overall bet profit margins are very low, and cost control has come at a cost. This means that there is very little space to cushion the addition of charges from local governments and suppliers.

The government has issued a strong warning in all of this and says that although the sector is ideally positioned for steady growth, it is still susceptible to external; pressures and volatility. The pub owners would be able to capitalise on these positive indicators if they all got it right, from this point onwards. The investment in outlets, jobs, communities and high streets would suffer if the pub owners got it wrong.