One of the pleasures of the autumn season is being able to visit a nice local pub with a roaring fire, nice menu and most importantly, something lovely to drink.
But new financial analysis shows this might be harder than ever with 10% of all UK pubs at risk of closure and one in five actually being technically insolvent.
Chartered accountants Price Bailey examined the credit risk scores and balance sheets of 37,961 pubs and found that 7,445 (20%) of them have negative net assets on their balance sheets which makes them vulnerable to bankruptcy.
Another 4,310 pubs are at maximum risk which is an increase of 930 from the previous year when 769 pubs went into insolvency – a 12% year-on-year increase. The data shows that around 11% of all UK pubs had both negative net assets and the maximum credit risk score.
Matt Howard of Price Bailey said: “The number of pub closures in the first six months of 2024 alone matched last year’s record and there are few signs of improvement. More than one in ten British pubs are technically insolvent and at imminent risk of collapse.
“Additionally, these businesses will find it almost impossible to access extra funding unless the owners provide personal guarantees, which few are likely to do in the current climate.
“The inflation rate for pubs remains stubbornly above the Bank of England’s core rate with little sign of relief. If there is a rise to the minimum wage in the Budget then many pubs that are currently on life support are likely to flatline.
“Workers in the pub trade have been among the chief beneficiaries of rises to the National Living Wage, which has been hiked by over 40% in five years. Even when pubs see improved turnover, wage costs mean that many pubs remain in the red for large parts of the trading week. Since Covid, many pubs have a legacy of barely serviceable levels of debt. Even with the interest rate cut from August factored in, if the National Living Wage gets an above-inflation raise then this could even delay further cuts.
“Staff shortages, rising overheads and declining footfall have all combined for the worst of all worlds.”
305 pubs closed in the first six months of 2024, which is over 50 a month.
According to real estate statistics at the end of June there were only 39,096 pubs in England and Wales. This figure also includes pubs that are vacant and being offered to let so the number of operating pubs serving food and drink to customers is even lower.
Once a pub closes in a community then it’s more likely that it will be demolished or converted into another building such as housing, offices or increasingly day nurseries.
Once they are gone the trend is that they’re gone forever.
Between 2020 and 2022 pubs and other hospitality businesses were given 100% business rates relief to help offset the worst effects of closing during the pandemic. This was subsequently reduced to 75% but is due to be removed altogether in April 2025.
UKHospitality estimates that this could cost the businesses they represent an additional £928 million and lead to some bills quadrupling. The loss of the discount and inflationary rises means that some pubs could even face an average business rates increase of £12,160.
A statement from the British Beer and Pub Association said: “While we know that brewers and pubs pour billions into the economy, their massive contribution to society is priceless, which is why any closure is devastating.
“Government must use this budget to cut beer duty, reform business rates and maintain the 75% business rates relief so that pubs can continue to remain a home from home.”
If you’re a landlord or run a pub and want some quick and comprehensive advice on what you can do to make sure that you will still be pulling pints in 2025 and beyond – get in touch with us.
In a free initial consultation our advisors will work with you to plan a path to strengthen your financial position and will help you identify what other structural changes you could make to restructure and restore stability and ultimately profitability.
That’s something we could all raise a glass to.