Thursday, February 19, 2009

It has to be accepted the smoking ban has had a massive impact on the trade but it's not a uniform spread across all pubs across the whole of the UK. The ban is part of a general cultural shift in western industrialised nations - whether liked or not it's inevitable - that's been going on for decades leading towards generally improving community health.

It's an unfortunate reality that removing smoking from all pubs has undoubtedly been the end of some businesses but the smoking ban in the context of the over all problems of the pub industry nevertheless IS A RED HERRING.

Pubs, as small businesses, are vulnerable to downturns in income. The most vulnerable (the majority of pubs in the UK) are those operating under the terms a legally binding contract called a tied lease where products are bought through the freeholder's wholesale supply account at prices which bear no comparison to free market prices (tied beer is at least DOUBLE the price available free of tie). This extortionate supply price of beer combined with tied rents which have aggressively increased faster than RPI over the last twenty years, have left the VAST majority of pubs (those which turn over less than 400 brewers' barrels a year) in such a financially fragile position that almost anything affecting their income tips them into financial crisis.

The last three years ahve been terrible for these businesses - with impacts from the smoking ban, three bad weather summers, wholesale supply and operating cost prices increasing faster than you can say 'drop the duty escalator' to a misinformed Darling, supermarkets actually PASSING ON the benefit of their buying power to their customers when pub companies don't pass theirs on to their pub estates, and the credit crunch. All real financial impacts, all squeezing pubs, all on top of unsustainable rents and beer prices. And the pub companies are not taking their fair share of the hit because they blame the government and will not accept that they are part of the problem. The big problem the pubcos' have is that they've got no financial leeway. They need ALL the huge profits they're still tearing out of their pubs just to pay interest on the unbelievable levels of debt they've stacked up against over inflated property values of their pubs.

$700 million a year comes straight out of our customers pockets, over the bar and flies overseas just to make interest payments on debts. This is not prudent housekeeping. The pubcos have sold, and resold, the family silver and it's lessees, publicans and customers who are paying for it in ridiculously overpriced beer.

THIS is why pubs are closing.

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