Last week I touched upon the fact that there is only capacity for a certain number of pubs and bars at any time in a given area.  This number is a complicated one based upon the effect that social, economical and political factors have on that same population.  The side effect of this complication is that the capacity is demarcated by a glass ceiling, you don’t notice it is there until your pub or others around you start to bang their heads against it.

Take for example two different areas at different end of the class spectrum. Firstly, you have an estate where a large number of people who are on benefits,retired or alternatively in minimum wage jobs. As a landlord, the pattern is familiar week after week, the peak of your trading are the days after wages, payments or pensions have been made when there is still some spare money in the family pot.  As the week or month goes on, people become more wary regarding their money and less is spent in your pub.

A lot of pubs in such areas belong to Pub Companies and of course the rent is not cheap for the area, neither is purchasing beer at a huge markup from them.   The quandary is that if you had more than one pub in the area then to attract relatively low income drinkers your prices have to be pitched at that level and compare well to your competition, hence a smaller profit margin on each pint to contribute towards the running of the pub and your living wage.

The Government recently capped benefits to approx £26,000 per year and in the same area there is a small number of families over that figure whose income has been cut.  Jobs or working hours may have been lost also.  Suddenly the people who kept you going at the quiet end of the week are no longer drinking with you, choosing cheaper supermarket beer or not to drink at all.  It may be just those drinkers who make the pub a worthwhile business venture.

After a period of this, it is a sad inevitability that a significant enough number of people will chose based on price, and at least one landlord will be forced to leave the business, usually at a big personal financial cost and with the loss of their home.  It is all about the moment, a few months later a large business may relocate nearby and the job market picks up allowing the new landlord of the same pub to make a relative success of it, but it is too late for the one who had to walk away.

Looking at the opposite end of the spectrum, if you are based in a well heeled area there is a lot of spare money at the moment due to interest rates being at basement levels and the sizable number of large mortgages leveraged against the surrounding properties being relatively easy to service.  Imagine you run a gastropub in the area, your rent, overheads and staff costs are significantly higher than my previous example due to the area, higher competition for good employees and the expected level of quality and service from your customers.  You can charge a lot more for your food as the market will bear it and your beer will have more of a markup to represent your extra costs.

If interest rates go up by 2-3% over the period of a few years and their income remains the same, they are facing an increase in payments of hundreds of pounds and with it a good amount of the money that may have flowed into your tills.  Over time that family that was spending £80 a week on a couple of dinners out with drinks is now only coming in every couple of weeks, multiply that across a multiple customers and you can see a significant drop in income.  Like in the less affluent area, people may chose to eat at cheaper venues, but in this case possibly to “maintain a lifestyle” and some may just cut down on visits.  The market in any area needs a certain cash pool to make it sustainable, when the pool shrinks, so the market needs to adjust to fit it, sadly with closures again.

Rich or poor, our pubs have to play by the same rules at the end of the day.  We can only make sure that our favourite pubs survive on a small scale by patronising them on a regular basis., The overall picture of how many pubs survive in an area is down to powers beyond our control. But we can do our bit towards it.  Happy Supping!

  1. Fantastic article, as most if yours are. I would really like to meet up for a couple if you fancy a chat. I am from Bradshaw, drink in the golden fleece, a change of venue for you – but a change is as good as a rest! Hop you will accept this invitation, regards, Simon