Really Useful Knowledge on the Budget PubCos & Bars
The Times published an interesting piece on the impact of the Budget on Pub Companies and pubs on 12th November. It was written by a financial journalist who I suspect also does analysis of the sector.
For those who don’t know how market capitalism works (if it does) analysts who work in specific sectors look at company performances on things like profit, cash flow and overall EBITDA. They then determine what this means for the share price and whether or not a company is worth investing in or not. As someone who has worked in the City of London since the late 1970s (and notionally still does) this is a commonplace.
It is however very one-dimensional. Really useful knowledge on pubcos and bars suggests other factors.
Firstly the cost of energy remains very high and that is a big cost for pubs. Secondly while inflation may be around 2% pretty much everything costs a lot more than it did in 2020..
Post the Budget the share price of the three PubCos that the Times looks at, Wetherspoons, M&B and Youngs (not sure why Marstons was missed) has gone down. That is a concern for shareholders a few of whom may even drink in their pubs.
The main issues have been an increase in Employer National Insurance costs- which is limited but when aggregated over large workforces significant. The second issue is the increase in the national minimum wage from next year.
While Tim Martin is quite often heard complaining about this he hasnt on this occasion. Spoons currently pays just above it (as I suspect the other two PubCos do). Many may disagree with Martin’s politics but there is no question he is an astute business person. Staff retention at Spoons is surprisingly good. While terms and conditions are hardly great (and would be better with a union) if they were worse workers would simply be off elsewhere- to supermarkets for example.
Some pub campaigns have been more voluble about the wage rise to which one can only wonder if they are just making anti-Government propaganda-(the Beerage is historically Tory) or really don’t realise that if people are paid more, they have more money some of which might get spent in, er, pubs, driving trade and profit.
Still the PubCos will survive and they will pass on at least some costs. Indy pubs and bars may well struggle but this is hardly a new story. Labour recognised this before the election and promised action (though not in the Manifesto). A reform of Business Rates- a big issue for many bars- is promised but not yet
Still as Alex Glasgow had it, as soon as this pub closes the revolution starts.
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