More pub and bar companies are going bust in the UK due to Brexit-driven cost rises exacerbated by teetotal millennials, reports Accountancy Daily.
The number of pub and bar insolvencies has escalated by 13% to 530 in the last year (year-end September 30 2019) up from 470 the previous year, shows ONS figures.
This is the third successive year pub company insolvencies have increased, resulting in a four-year high. This trend is driven by a sharp rise in pub costs, as well as a gradual slowdown in consumer spending in the sector and a rising increase in business rates, suggests UHY Hacker Young.
There were 48,350 UK pubs in 2017 compared to 57,500 in 2007, that is 9,150 pubs shutdown in a decade, almost 1,000 a year according to the British Beer and Pub Association (BBPA).
The top three UK pub groups in 2018 were EI Group (9.9%), Greene King (6.6%) and Star Pubs & Bars (Heineken UK) (6.6%), with independents making up the highest number of outlets at 18,532, according to the MCA Pub Market Report.
Millennial drinking habits are proving very bad for business as the younger generation are drinking more alcohol-free beer, celebrating Dry January, and choosing not to drink at all.
A report from BMC (BioMed Central) public health says rates of teetotal young people (under 25s) increased from 18% in 2005 to 29% in 2015.
The weakness in sterling as a result of Brexit has also played a huge part, as pubs are having to pay more for imported drinks. Fragile consumer confidence means pubs have found it hard to pass those cost increases to customers.
Pubs have also been impacted by increasing staff costs due to the rise in the minimum wage, with the National Living Wage, paid to those aged 25 and older, increased twice in a little over 12 months. The Living Wage rose by 5% in April this year from £7.83 to £8.21 per hour.
Peter Kubik, partner at UHY Hacker Young, said: ‘It is hard to see any short-term changes to the pressures on the pub sector.
‘That is not to say that the pub sector is in a hopeless situation. A lot of pub groups have improved profitability by adding more food sales and non-alcohol sales in order to increase footfall in slower periods of the week.
‘Upgrading premises to maintain appeal with younger drinkers can also help cope with weaker sales amongst that group. However, developing a food offering or refurbishing requires capital. Smaller pub groups are finding it hard to get bank finance at the moment or non-bank finance at competitive rates.
‘Hopefully, once the Brexit question is cleared up, high street lenders will be less nervous about lending to smaller pub companies.’