Top 50 pub and bar companies see 4% rise in turnover – but how can their smaller competitors ensure they are not missing the ride?
The UK’s economic climate hasn’t been looking its most positive over the last year – and Brexit has played no small role in this.
In the wake of the UK’s vote to leave the European Union, the uncertainty that has surrounded the future of many businesses – and, indeed, individuals – has had a lasting impact.
For example, GDP growth ground to a meagre 1.8% in 2016. More recently, figures show that consumer spending growth plummeted to 0.1% in the second quarter of 2017.
The pub and bar sector has – like many others – found itself in the firing line. It has been hard hit by a reduction in consumers’ ability and, in many cases, disposition to spend their cash.
It has also been dealt an equally hard blow by the considerable number of Europeans choosing to leave the UK for Europe – possibly pre-empting that they could soon be asked or encouraged to do so.
Against this somewhat testing backdrop, the UK’s Top 50 pub and bar companies can be congratulated on having reported a 4% increase in turnover last year – to £11.7bn.
This is an impressive performance – and one which they should be proud of. But it is by no means an indication that pub and bar companies can sit back and relax. These results have taken hard work – as will continued positive performance, if this is to be achieved in the coming years.
Indeed, in addition to Brexit, pub and bar companies have a number of other issues to consider and mitigate against. Amongst them are April 2018’s hike in business rates and in excise duty.
Another is the continued popularity of the ‘big night in’ as consumers looking to save their pennies opt for food delivery services and an evening at home, rather than heading out.
A big driver of growth for larger pub and bar companies in recent years has been M&A activity. In July 2016, bar and restaurant operator Drake & Morgan acquired Corney & Barrow Wine Bars – whilst pub giant Greene King made a £770 million acquisition of the Spirit Pub Company in 2015.
Alongside this, larger pub companies have also been making capital investments to ensure that their venues remain appealing to consumers – and that their profit margins are as large as possible.
Amidst the current popularity of artisan drinks, they have, for example taken the opportunity to invest in craft beers and artisan spirits – which enable them to take a greater cut on sales.
The ability of smaller pub and bar companies to follow suit is sometimes limited by the continued risk aversion of many traditional lenders.
Yet it is incredibly important that smaller pub and bar companies access the cash they need to make more strategic acquisitions – as well as make capital investments in their premises to ensure they continue to attract customers.
Alternative finance providers are in many ways at an advantage to more traditional lenders because they have greater flexibility and are able to meet borrowers face-to-face, making a more qualitative assessment of their borrowing capabilities.
They are, as a result, often able to work alongside pub and bar companies to design and deliver a financial plan that suits their specific needs. This, in turn, means they play an incredibly important role in the ongoing success of the pub and bar sector – one that they shouldn’t overlook or fail to take advantage of.