Martin Williams portrayed a crumbling Scottish pub trade in his recent Herald article. He was reporting on Paul Waterson, Chief Executive of the Scottish Licensed Trade Association, who fears that we will soon see widespread pub closures as a result of new drink-driving laws.
Waterson expects to see closures ahead for the pub business. He predicts that future closures could outnumber the estimated 6000 pubs that closed across the UK following the introduction of the smoking ban in 2005.
In our Outstanding Podcast Number 6 we mentioned that the introduction of stricter rules are bound to affect the pub trade. We believe that destinations which rely on customers driving to them will suffer, and looked at the fate of country pubs and golf clubs. Sadly for the Scottish pub scene evidence of a decline in footfall and profits is emerging.
Hospitality chain Greene King’s January sales show that pubs in Scotland are not performing as well as the rest of the UK. The chain enjoyed a 2% rise in sales in their pubs in England and Wales in the first month of the year, but not Scotland.
Additionally on 23rd January pub chain Maclay Inns, which includes popular Glasgow haunts Landsdowne Bar and Paisley’s The Bull Inn, went into administration. These, and many of the other venues owned by Maclay Inns, are pubs which have long been integral parts of the local community.
In Paisley’s town centre The Bull Inn was established in 1901 and has long been at the heart of the local community, however, with the changing face of the pub industry it has struggled.
Throughout the pub trade landlords report that customers are staying away from the pub, or are spending less time and money.
Especially for rural pubs post golf drinks and long lunches were traditionally a reliable income source, but this has changed and it is having a marked effect on profits.
Research from Beacon, the UK licensing trade purchasing business, reports a drop in trade between 10-60% in Scotland. Industry chiefs says closures across Scotland have averaged two to three per week since the introduction of the lower drink drive limit.
Easter and Summer are customarily busy times, and many pubs usually rely on peak season takings to get them through quieter months. Many within the industry have called for the Scottish Government to support the pub trade either by reducing business rates, or relaxing drink driving laws. So far there is no unity on what form this should take, and no plan of action. What is doubtless is that pubs will have to adapt to maintain their income.
Tim Martin, Wetherspoon founder, has announced that he will invest heavily in his pubs. Discussing the £400 million planned investment for JD Wetherspoons he opined that to continue to attract footfall to pubs, including those under his ownership, they must diversify beyond serving pints.
JD Wetherspoons ability to invest is both fortunate and rare, and many pubs will struggle to access investment necessary to diversify and continue trading.
Since the recession hit access to investment has been challenging for every sector and for the pub trade this could become more testing. Banks and brewers, aware of the rising risk, are likely to reduce lines of credit. These sources are the traditional lenders for pubs and struggling pubs will need to look elsewhere for necessary funds.
Crowdfunding may be the key and has grown in popularity in recent years. The sector predicts expansion ahead, and will attract many businesses who have lacked investment in recent years.
We are concerned about the risk for both borrowers and investors. There is little regulation in place around crowdfunding.
While all investment comes with a risk attached the lack of regulation around crowdfunding means that it is higher risk and less predictable for both businesses and investors.
Businesses who use crowd funding will need to adapt. This new relationship will not offer the known parameters of traditional lending from banks and brewers.
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