What can pub owners do next?
It was a running joke before 2020 that if you couldn’t make a profit running a pub in England, Scotland, or Wales then you must be one of the worst business owners in the country.
Now as pub insolvencies are creeping back to their pre-pandemic levels and every publican and landlord is facing a range of negative factors so widespread and severe, the question now could equally be, ‘Could the best directors in the country make a profit running one?’
The latest pub insolvency figures show there were 512 insolvencies in 2022 which was an increase of 83% over 12 months and was also the third consecutive year pub company insolvencies have increased.
Total Pub insolvencies (beverage serving activities)
|Number of insolvencies
What has changed?
If we look closer, we can see that there are a multitude of factors affecting pub owners that individually might have been handled more assuredly but together represent a significant sea change and threat to the entire industry.
Changes in drinking habits
Post-pandemic life has caused a drastic change in the UK’s famous drinking culture.
According to the charity Drinkaware, following the surge of alcohol consumption during the lockdown, there has been a general decline in drinking with no alcohol being consumed on 29% of all pub visits.
This is particularly on the rise within the younger generations, with the 18 to 24-year-old cohort being the least likely to drink and 26% of that age group being fully teetotal already.
Increased competition and changes in customer preferences
The post-pandemic society also saw a shift in how consumers are choosing to socialise and entertain themselves, with many opting for experiences beyond the traditional pub culture.
Whether this is from the comfort of their home with streaming services and online gaming or by spending more on amusement and recreation businesses such as escape rooms and mini golf.
Everybody will be familiar with terms like the cost of living crisis and living conditions being squeezed but sometimes it’s worth listing all the specific elements that come under this description because it’s worth taking a moment to recognise the sheer number that pub owners and every other director in the UK is having to deal with.
- Wages rising including rises to the minimum wage and national living wage
- Difficulty and Inability to hire trained and motivated staff
- Business rates rising and Covid-era help for the hospitality sector has been withdrawn
- Landlords raising commercial rents
- Raw material costs rising with a practical inability to pass the costs on to customers
- Energy bills are continuing to rise and government support is reduced at the end of the month (it will be replaced by the Energy Bills Discount Scheme which will run for another 12 months)
- Bounce-back loans have to be repaid without a return to previous turnover levels
What are the options?
The good news is that pub owners do have some options available to them but they depend on what the realistic prognosis of their situation is.
If they have a clear vision of how they can elevate and reinvent their pub to stay competitive but have outstanding debts hindering their efforts then they will generally have two options:
- Creditors Voluntary Arrangement (CVA) – This is a formal insolvency process agreed upon between a company and its creditors where a proportion of debts are often written off and the company agrees to pay back a lower proportion of the remaining debt in regular monthly instalments. This will free up more cash every month to help them out.
- Administration – This is also a formal insolvency process that puts a company under the control of an external administrator to see if the pub can be financially rescued and things turned around. In this scenario, unnecessary expenses will be cut back but once the business is on a sure footing and making a profit again then control is returned to the original management.
Not every business can be saved and If you feel like you have exhausted all of your options and think it is time to move on then the best option would most likely be a Creditors Voluntary Liquidation (CVL).
In a CVL process, the directors and/or shareholders make the collective decision to close the company by placing it into liquidation. Then a licensed insolvency practitioner will go through the process of realising assets, dealing with staff redundancy, and closing the business efficiently.
Unsecured debts, including bounce-back loans, are written off after a CVL is completed leaving directors free to move to their next venture without being hindered by excessive arrears or repayments.
Chris Horner, insolvency director with BusinessRescueExpert, said: “Any pub owner or director who fell asleep in February 2020 and woke up this year would not believe what has happened to the industry.
“During the first few months of the pandemic and lockdowns, furloughs, and social distancing everybody would have accepted that it might have taken six months or so for conditions to return to normal.
“If you’d told them three years later that a quarter of under 24s had stopped drinking alcohol all together or that people would rather throw axes than have a couple of pints they’d assume you were pitching a bleak sci-fi movie plot.
“For smaller communities especially, the pub has been a hub and focal point as well as a place to get a good drink, nice meal, better company and for a reasonable price. All of this is now under threat and this is unprecedented.
“This also means that pub owners now have to think more like a traditional director and plan strategies that will help them survive and ultimately thrive in 2023 and beyond and this is where getting some impartial expert advice could prove critical.”
If you are a pub owner and find yourself struggling, or worried about what the future holds, why not take advantage of some free advice?
They’ll work with a dedicated expert advisor who will let them know what options they have and how they can implement them quickly and efficiently to help their business during these unprecedented trading times.
The sooner you get in touch, the sooner you can implement options that will hopefully make things easier for you.