What landlords and licensees need to know

“When discovering a new land – the first thing the French build is a fort; the Dutch, a harbour and the English? An alehouse.”

There is nothing more central to British cultural life than the pub.

Whether a Tudor beamed coaching inn overlooking a village green, a vibrant industrial chrome and glass city center sweatbox, or a glorified living room with the same three people sitting in the same seats every night of the week, the pub is the quintessential touchstone of British life.

Births are celebrated, deaths are commemorated and marriages are announced with days-long sessions. Loyalties and bonds are formed within that can last a lifetime – you have your first drink, you turn out for the team in Sunday League and eventually you graduate through darts to the bowls or dominos teams – which if anything are even more competitive and cut throat than the football was.

It’s something of a surprise then that such a critical part of the national psyche wasn’t singled out for specific protection and support in the same way that other businesses in the wider leisure and hospitality sector have.

While some could take advantage of business rates relief and others the Small Business Grants Fund (SBGF) or the Retail, Hospitality and Leisure Grant Fund (RHLGF), not every pub is eligible even though all are facing the same existential threat.

Some are also having to continue to pay rent to the same company that supplies their main product – beer.

Beer ties

The “beer tie” is a traditional but controversial covenant under which the tenant of the pub pays more for the beer than would be expected but this is usually in exchange for lower rents.

Under normal circumstances, this might be a tenable arrangement but with no income being received by the tenant from across the bar, it’s becoming a bone of contention.
So far of the six large pub-owning groups in the UK, only Admiral Taverns, has offered a rent cancellation until the end of April for its tenants.

After that, any of its pubs that didn’t receive any additional government support would remain free of rent and any that did receive help would only be asked to contribute a small percentage of it as rent, in most cases less than half of what they would usually pay.

The situation is similar to the stand-off that is developing between retail landlords and their tenants that we’ve covered in an earlier blog. 

It seems likely that landlords will have to restructure rents but are holding out too see whether there is government regulation. Sadly for publicans, the delay is causing more sleepless nights wondering whether they will have a business left by the end of the Summer.

There was some hope that the industry would avoid being the first in and last out of a lockdown with the announcement of certain specific lockdown conditions being eased.

The Prime Minister mentioned in his televised address on Sunday that some in the leisure industry could open again within two months provided social distancing rules were enforced, but this was later clarified to only refer to cafes and restaurants with outdoor space; pubs in England must remain closed until July 4th at the earliest and possibly beyond. 

Apart from the logical and moral contradiction that, for example, an outdoor restaurant that also sold drinks would be back in action soon but a pub of equal size with a large beer garden that also sold food wouldn’t – collectively the industry is worried.

Is help coming?

Emma McClarking, Chief Executive of the British Beer and Pub Association (BBPA) said: “With insufficient clarity as to when pubs will reopen, our sector remains in limbo and facing severe uncertainty and financial devastation. 

“If the government plans to keep pubs closed until the final phase of release, this would make pubs first in and last out of lockdown.

She also estimated that 40% of members, some 19,000, said they could close if they didn’t get any additional financial support by September.

Her comments were made before Chancellor Rishi Sunak announced that the government was extending the Coronavirus Jobs Retention Scheme (CJRS) to allow staff to continue to be furloughed until the end of October 2020.

Additional details will be published shortly but staff will continue to be paid at 80% of their wage until the end of July; other changes will see a reduction in the amount paid by the government with more assistance to be made up from the employer.

Crucially, furloughed staff would shortly have the option of returning to work on a part-time basis without forfeiting any income which could help pubs, when they prepare to eventually reopen.

Although any easing of the lockdown thoroughly depends on the available science and advice, one thing for definite is that it will end one day.

Whether that’s weeks or months away, bills need to be settled, staff need to be paid and premises need to be secured. All of these would put pressure on even the most profitable pre-pandemic company.

What options you have for your business depends on what decisions you make now – before the lockdown is lifted.

There are always economies and changes you can make to help free up any financial space you can along with other moves that can ultimately keep your business afloat.

The first one being getting in touch with us.

We’ll arrange a convenient, free virtual initial consultation with one of our expert advisors to discuss your unique situation and circumstances.

Once we understand where you’re at right now, we can help you plan the most efficient and effective way forward for you and your business.

We’re living and working through some unprecedented times but getting good advice will never go out of fashion.