The pub is one of Britain’s cultural icons, like the Queen and Big Ben.
But these drinking houses have been in decline for many years.
So why is this happening and are there any solutions?
In the last 35 years, a quarter of the pubs in the U.K. have disappeared.
In London, 32 of the city’s 33 districts have less bars and pubs than they did at the turn of the millennium.
Hackney was the only one which saw an increase.
They’ve now turned into this,
and this,
and even this.
The closures in London are largely down to rising property prices,
but for the U.K. as a whole, the pub’s decline is more to do with a change in taste.
Consumption of beer in the U.K. has long been in decline, with many people consuming less alcohol,
while others have switched to drinking wine instead.
Helping pubs to tackle these challenges is the British Beer and Pub Association.
People are spending more time in their homes and the technology and the environment at home
is more comfortable than it ever was so actually,
pubs have to work harder to get people to go out in the first place.
There are other factors which are at play here,
like changing tastes, more people are drinking wine. How do you reverse that?
Well, we’ve been running a very successful category campaign to promote beer,
particularly when you’re matching a drink with food.
So, typically when people go out to eat with their partners they may well revert to wine
rather than drinking beer which would be their first choice.
Many experts also believe increased taxes on alcoholic drinks have hit beer prices particularly hard.
Britons pay the third highest level of beer tax across the whole of Europe.
It’s grossly unfair and it has a major impact on pubs.
So when the tax comes down clearly that enables us to invest in the business,
to improve the pubs, to make them more attractive places for people to want to go out to drink.
The pub industry has seen some growth however.
Since 2010 the number of independently- owned pubs actually increased,
with the smaller ones taking advantage of a £1,000 rate relief put in place by the government.
Jerusalem Tavern is one of the oldest pubs in London and has managed to remain independent,
well, kind of.
A lot of the business models you could go down to the micro pubs,
so they have a micro pub with a microbrewery at the back and they only sell their own beer.
This is sort of the same business model but on a much larger scale.
So St. Peter’s brewery own the pub, but it is independent, but we also have the flexibility to buy
any of our other supplies like drinks as in wine, spirits, soft drinks, etc, and food from anyone we choose to.
However, the majority of pubs in the U.K. operate on a ‘beer tie’ model.
Here’s how it works.
A tenant rents a pub from a company and buys beer from them or their chosen supplier at inflated prices.
In return, they pay lower rent.
Critics argue this can restrict choice and competition between alcohol providers
and it forces pub tenants to charge more for drinks to cover the costs.
The pubs get caught out being tied to the big multinational corporate companies
and that's where people can get their fingers burnt unfortunately.
What will happen is that they’ll buy in at higher costs and their rents will be higher as well,
and they’re making a lot less profit basically.
In 2016, the government responded to those higher rents, creating the Pubs Code.
It allows pubs to renegotiate their deal or break the beer tie altogether.
In essence, making sure individual pubs aren’t any worse off than if they were running independently.
It has led to a small number of arbitrations, which have changed the dynamic of the relationship
between landlords and tenants for the better I would say.
However, the new rules have hit large pub groups hard.
Ei Group is the largest pub owner in the U.K., owning more than 5,000 pubs.
Last year, its pre-tax profits fell 68% trying to restructure.
Tied pubs, do they have a future as a business model?
Yes, I believe they do and I think the evidence is clear that people
who want to get into the pub business, with very little capital,
can use a supply agreement with a brewer or with a pub company
and then have their own business they can invest in.