Resilient operators have weathered various cost pressures so far
PUB numbers across the UK have “stabilised” despite 18 months of cost pressures, according to Christie & Co.
In the property firm’s half-year review of the pubs market, it said that following decades of contraction, pub supply “is now broadly balanced with good demand, with the rate of UK pub closures having stabilised to nearly nil”.
Christie & Co said it has continued to observe confidence via investment in the market, with the on-trade’s bigger operators, including the likes of Marston’s, continuing to build new pubs.
The private free house segment, meanwhile, has “continued to bounce back”, with some return in lifestyle buyers observed by Christie & Co.
Growth aspirations amongst the most successful of the smaller operators is said to have led to the rise in the number of multiple operators – many of whom “continue to drive demand from a transactional perspective”.
Reflecting on the predictions it set out at the start of the year in its Business Outlook 2018 report, Christie & Co said with the sector at the time “reeling” from the combined impact of the National Living Wage, pension auto-enrolement, Apprenticeship Levy and business rates revaluation, the prevailing mood “was a sense of grim determination to weather the storm”.
And while the property firm admitted it expected to see a rise in merger and acquisition activity on the back of this, transaction volumes “have remained relatively subdued, with fewer deals than predicted”.
“The sector has demonstrated its resilience once again by absorbing rising operational costs without passing too much of a price increase onto consumers,” it said.
While the agent foresees many businesses operating “defensively”, with a focus on maintaining margins throughout the rest of the year, it said the most successful licensees are targeting marginal pre-tax growth, with a focus on recruiting and retaining the right talent to sustain future growth.
However, the firm warned that “overleveraged and under-invested businesses are still at risk”, with some “casualties” still expected throughout the second half of 2018.