The Pub: Under Imminent Threat

The pub - an iconic venue in any, village, town, or city, with a perfect atmosphere on (nearly) every night out. The place where memories are made, romances blossom, and where young and old adults relax after work. Sadly, those times seem to be nearing an end, with my local pub now feeing more like my living room with strangers inside.

We all know how it came to be like this. Covid-19 needs no introduction. However, I feel that it is appropriate that we delve into the economic situation within pubs at present, considering a 10pm curfew has been put in place despite strong public opposition in recent weeks. Likewise, there are rumours that further government restrictions will be imposed this week, seeing the [once-again] temporary closure of all pubs in the country.

The sector in brief

Hospitality constitutes some 4 per cent of the U.K.’s GDP, and 9 per cent of the U.K.’s total employees work in the sector. Thus, recent measures will have clearly affected a big sector within the country. Examples of measures range, with pubs and bars obviously being completely shut a few months ago, and pubs now having to adhere to strict closure times and social distancing. This has led to a reduced foot fall, and hence less revenue for businesses.

The Eat Out to Help Out scheme did give the sector a much-needed boost until September, however the governments pull back of cash has put the sector on its knees, with urgent calls for help.

The economic situation

It is hard to see the real damage done, as the damage is still being inflicted. However, investor sentiment gives a great indication of the bigger picture.

Investors see the situation as dire. Upmarket City Pub Group’s share price is down 73 per cent YTD, with Revolution Bars (my go-to local pub in Brighton being owned by them), down a whopping 86 per cent per share this year. Compare that to the tech share prices, hitting all-time highs almost every day. As such, a recent letter by 100 big hospitality names warned the government that many businesses “will be lost for years to come” if an economic solution is not found soon. Whether that be an injection of cash, loosened restrictions, or tax changes, who knows. But with the government warning of tougher measures, and a spike in Covid-19 cases, the situation is not looking bright.

The bright side

Despite this, there is positive news. Rural pubs have seen a spike in revenue. Working from home has increased footfall in small, independent pubs, that are situated outside city centres. With reduced commute times, employees have more time and money to spend on drinks and pub grub. For example, Loungers saw sales rise nearly 30 per cent compared to the same two-month period the previous year, after lockdown ended.

How the future may look

This positive news needs to be viewed in context. Yes, the positivity is few and far between. But it is definitely part of a wider shift in the modern world.

With Covid-19, sectors are going to have to change, especially the hospitality sector. Perhaps, bigger venues will be needed, so social distancing can be safely implemented. Buildings outside of London, and in rural areas, will definitely be valuable assets if working from home continues. We could even see the iconic U.K. venue, the pub, start to die out – as more people work from home. One could argue that surely, they will just drink at home?

These are all questions that analysts will be trying to answer, and questions that students should be thinking about to develop their commercial awareness. Let me know your thoughts, and your favourite local pub, below!

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