Wednesday 29 September 2010

The death of passion

It’s reported that the Passionate Pub Company, a seven-strong pub operator in the North-East, has gone into liquidation after its bank RBS withdrew its support.

Passionate, which has traded since 1999, said it had been severely affected by the smoking ban, changes in the market with the move towards food sales, and price competition from supermarkets.
Are you listening, Gillian Merron? Probably not. What does she care now she’s lost her seat?
“It is hoped that the policy makers and the legislators can see the consequences of their actions on a beleaguered but important sector of the economy.”
Well, precisely. And will they?

On the same day, new Labour leader Ed Miliband expressed his support for pubs – but if his chief weapon is to increase off-trade prices, that is simply a blatant attack on the living standards of the less well-off. Who was it Labour was supposed to represent again? And it is an exercise in despicable hypocrisy when he supported the measure that has ripped the guts out of the pub trade, especially in working-class areas, over the past three years. I wonder if Ed has spent much time going round the pubs and clubs of Doncaster North asking ordinary drinkers why trade had fallen off a cliff.

The damning verdict of Mr Eugenides on his defeated brother is equally applicable to Ed.


  1. A really sad day for pubs.

    "Wiltshire-based operator "slaughtered" by smoking ban"

  2. Now that the banks are calling in
    risky financing,at least 7 major
    institutions are ready (after Oct 23)to put the nail in the coffin
    of at least 5500 pubs and other
    venues offering poor return.
    As we all know ,even the large groups are maintaining struggling outlets by asset disposal.
    Some stakeholders were holding out for a possible relaxation of
    current restrictions in a July
    review.That is foreby ,now the axe will really swing especially in
    Jan-March 2011

  3. I too am sceptical of the rhetoric of so-called Red Ed; now that's a laugh in itself. I posted on my own blog (as you know, since you addded your own comment) that rejection of minimum pricing (profits to retailers) was not done for altruistic reasons, seeing that no party has proposed scrapping the beer tax escalator (extra cash to Treasury).

    I'll wait to see what actual policies he comes up with, then I'll wait to see how energetically he pushes them in Parliament. But Opposition pledges often have little value, forgotten when an election is won ~ like the LibDems and the VAT increase, which will attack pubs next January.

  4. D'ye not think the slump in property values has got something (everything) to do with this? It's not so much that these pub-owning groups are "maintaining struggling outlets by asset disposal", but that in many cases this was the business model. Borrow shedloads from the jolly bankers, secured on the pubs - sell off the plums for housing - service the debt with the proceeds - bingo! you've got a (smaller) pub estate for next-to-nothing. I feel for people who've lost jobs, or their locals, but this is the kind of thing that's got us all into this sh*t isn't it?

    This is not a comment on "Passionate" who, for all I know were genuinely committed to running genuine pubs.

  5. As the article says, "It is understood that the liquidator has returned six Enterprise leases and a Mitchells & Butlers franchise," so Passionate wouldn't have had any exposure to property values.

  6. But Mudgie - the business model that underwrote the leases and thus set the rents did!

  7. Yep, reely, it was always the cash coming in from "disposals", that gave the big pubcos the "debt service coverage" that kept the banks happy to lend. But with rents contributing (I gather) less than 30% of income, they're doubly vunerable to declining sales and slumping property values. You might consider the example you introduced a good one showing the lessor unable to adjust rents in a way that would enable the lessee to make any profit. That's clearly "broken". But there's a strong argument that the underlying problem is the over-valuation of the properties in the first place.

  8. And why have pub property values fallen over the past three years, I wonder?

  9. See, it doesn't really matter whether the decline is related to the smoking ban. That would be just proximate cause. The "structural" issues (some particular to pubco, some all over the industry); overvaluation of the property portfolio, high endebtedness, exposure to regulatory change, an inflexible offering in a changing market, competition, etc. These created a sector that was highly vulnerable. So much of the operating profit was being sucked out for debt service that many "marginal" boozers had been limping along for years with little return for the tenants.
    If you're right, if the smoking ban triggered a sudden decline in business - this merely underlines how fragile the industry had been allowed to become. Perhaps instead of crying over spilt milk, if we really care about pubs, we should look at how we might get a stronger industry that doesn't depend on exporting costs to wider society, or extracting profit from the pockets of the less well off and converting it into banker's bonuses.

  10. And why have pub property values fallen over the past three years, I wonder?

    Er, it's a bit out there, but is is it for the same reasons as domestic house prices? Or are you claiming my house has also devalued because of the smoking ban?

  11. But pub prices have fallen much further than house prices, haven't they?


Comments, especially on older posts, may require prior approval by the blog owner. See here for details of my comment policy.

Please register an account to comment. Unregistered comments will generally be rejected unless I recognise the author. If you want to comment using an unregistered ID, you will need to tell me something about yourself.