Pubs and bars in ‘robust health’ as sales and expenditure continue to rise

By Luke Nicholls

- Last updated on GMT

Related tags: Cent, Consumer confidence, Renting, Cost

Like-for-like sales across the UK pub industry are up by 5.8 per cent for the year to October 2012
Like-for-like sales across the UK pub industry are up by 5.8 per cent for the year to October 2012
Despite being continually battered by a perfect storm of high taxes, cheap supermarket alcohol and grim economic times, life for Britain’s pubs and bars is on the up – capex has risen by more than 66 per cent over the past year as operators continue to invest in their estate, their offering and their people.

According to the latest Benchmarketing Report by the Association of Licensed Multiple Retailers, the pub sector is in ‘robust health’ and well-placed to capitalise on increasing consumer confidence and economic regeneration. Average like-for-like sales are up by 5.8 per cent for the year to October 2012, with community locals and food led venues outperforming the market.

“Taken as a whole these findings reinforce our messages to government – we are an industry well able to generate jobs, invest in community facilities and play a full part in the Big Society,” said the ALMR’s strategic affairs director Kate Nicholls.

“The fact that small, community operators are now out-performing the market in all these areas demonstrates in spades that we are the real engine of growth and the best barometer of business and consumer confidence. We have the potential; we need to be freed from red tape and punitive taxes to deliver that in full.”

According to the Report, which benchmarks operating costs, business performance and market trends, community local pub operators have seen resurgence, outperforming the market with like for likes of 7.6 per cent. But those operating under tied leases continue to struggle, reporting below-average capex, margins and growth. For the second time, tied rents as a percentage of turnover were higher than rents for free-of-tie and commercial leases.

Cost control

To make matters worse, the average cost of running the average pub has increased for the first time in four years; to just under half of turnover - up 3 per cent to 48 per cent of turnover with an additional 10 per cent for rent across the leased sector. These increases are fuelled by legislation, payroll and general operational matters.

“Cost control is a critical determinant of business profitability, particularly in the pub sector where it is a key variable in rent and valuation calculations,” added Nicholls. “Operating costs as a percentage of turnover had stabilized over the past three years after peaking at 51 per cent at the height of the recession.

“That cost control has come at a price, however, and the report shows that overall outlet net profit margins are extremely slim, meaning that the cushion to absorb additional charges from local authorities, Government or suppliers remains stretched.

“There’s a strong warning to government in all of this. While the sector is well placed for steady growth, it remains volatile and highly responsive to external pressures. Get it right and we will be able to capitalize on these positive indicators. Get it wrong and investment in jobs, outlets, high streets and communities could all too easily suffer.”

The ALMR Benchmarking Survey has been carried out annually since 2007. This year’s report was published on 2 August and benchmarks costs, turnover composition, like for likes, margins, capex and rent as at October 2012.  An executive summary of the report is available from the ALMR website - www.almr.org.uk​.

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