Tuesday, 28 March 2017

Don’t get your hopes up

It’s long been an article of faith amongst many CAMRA members and anti-pubco activists that a major cause of pub decline is conversions to retail or office use that can, under the current law, be carried out without needing planning permission. They have therefore campaigned for this “loophole” to be closed, and the government has now committed to do this, an announcement that was treated by CAMRA as a major cause for celebration.

However, I’ve always argued that this has been greatly exaggerated as a reason for pub closures. You already need planning permission to convert a pub to residential use, or to demolish it and build a supermarket on the site. And, if the owner really doesn’t consider a pub to be viable, then getting planning permission to turn it into a shop may involve some extra effort, but is hardly an insurmountable barrier.

It’s interesting that in this news report, Dale Ingram, who has long been recognised as a vocal anti-pubco campaigner, reckons that, nationwide, this change is only likely to save 15 pubs a year nationwide, against a total of 1,200 closing. And I’d bet most of those will be in London where development pressure is far greater than anywhere else in the country. Frankly, it’s a drop in the ocean.

The point of the planning system is to prevent developments and changes of use that councils believe are inappropriate or would damage the character of an area. It can’t mandate that premises be used in a particular way, and if councils decide to dig their heels in over proposed retail conversions it could result in staring contests with owners and leave pubs derelict for a protracted period.

Don’t get me wrong, I think this is a welcome change which recognises that pubs are a distinct category of business that is often valued by local communities, and so official review is desirable before turning them into something else. It might cause pub owners to think again in a few marginal cases. But nobody should delude themselves that, in the overall scheme of things, it’s going to make much difference to the rate of pub closures. The “pub crisis” is fundamentally one of demand, not supply, and no amount of planning curbs is going to change that. To claim otherwise is putting across a false narrative about the causes of pub decline that does the prospects of pubs no favours.

We are yet to see the precise details of the plans. But if you turn a wool shop into a micropub, and then need planning permission eighteen months later to convert it back into a wool shop if it proves unsuccessful, it’s likely to deter people from opening up new pubs and bars in the first place, and could end up becoming a Pyrrhic victory. Surely there needs to be a time limit before the protection kicks in.

11 comments:

  1. The issue is not one of the trading profitability of a pub, but one of the main asset being poorly utilized as a pub. That the asset (building/land) has a greater economic value put to a different use. That value is freely derived through the revealed preferrences of the public in a market place. People want flat and shops more than pubs and this is revealed through the market valuations of the differing functions.

    Changes to planning law, assets of community value are about reducing the rights of the property owner over their asset and by inference this also reduces the value of the asset. The value of any asset is in your right to utilize said asset to maximise your return from it. By reducing the asset value of pubs you might save a pub that trades a surplus but not one that trades a loss.

    The unintended consequence is one for new investors. In taking property rights off existing investors you create a warning to new investors not to put your money in pubs. Not to buy a pub and not to allow your shop to be converted into one. What is given with one hand is taken away with the other.

    The is no legislative solution to the decline of pubs in a market economy. It would have to be an increase in demand for them and the hospitality they offer.

    ReplyDelete
    Replies
    1. You could just slash or waive certain "community" pubs' business rates, that would probably help make them more profitable.

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    2. The Blocked Dwarf28 March 2017 at 11:44

      I had assumed that 'community pubs' were all registered charities and qualified for 'Charity Shop' rates? Was I wrong?

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    3. The question of business rates goes beyond pubs, though. In placing a property tax on the assets of a business you favour business with fewer properties. Warehouse distributers like amazon over retail shops like HMV. It could be that many business taxes from rates to corporation tax are not fit for purpose if you were starting with a clean slate.

      Pub business rates are calculated different from other retail shops. Is there anywhere information as to whether this penalises pubs relative to whether the premises operated as a cafe, restaurant or shop?

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    4. The Blocked Dwarf28 March 2017 at 12:35

      Just googled business rates for pubs and found this:
      https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/598272/BRIL__2-2017__Budget_Measures.pdf

      "Support for Pubs
      The Government has also announced a
      new relief scheme for pubs that have
      a rateable value of below £100,000. Under the scheme, eligible pubs will
      receive a £1000 discount on their bill. DCLG plans to publish a consultation on the operation of the relief scheme for pub shortly"

      However as the comment from a former publican I linked to yesterday mentioned, I think, he was paying over a grand a month in business rates back in '03, I don't suppose that grand relief will make any real difference. Analogies about water and hot stones may apply.

      Also the question of what is an 'eligible' pub...?

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    5. Whilst a grand may seem a lot of money, it depends on the turnover & profitability of a business. If a pub pays £1k a week, what would a similarly sized & located coffee shop pay?

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    6. Eligible just means any pub with a rateable value of below £100,000.

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    7. The Blocked Dwarf28 March 2017 at 14:10

      it depends on the turnover & profitability of a business.-von Steinhauser

      Indeed as the publican's comment I quoted yesterday also mentioned:

      "Lastly concerning rents, I was paying £1080 per week rent in 2002, and my rates were £1000 per month; I know of pubs in Norwich that don't take £1000 a week now, yet back in 2002 I would take that on a Sunday lunchtime".

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  2. The Blocked Dwarf28 March 2017 at 09:27

    "People want flat and shops more than pubs"

    That tallies with what I see around here. Only anecdotally whilst driving past, the pubs here that have closed since '07 seem to have become either 'Tesco Quickies' or 'Luxury flats'...usually 'Luxury Retirement Apartments'. Offhand I can't think of a local pub that closed after '07 that has become offices. Probably in Norwich, with it's former 'pub for everyday of the year', there'll be a couple.

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  3. What is meant by “community pub”? Ok, we can describe what we mean but it is hard to legally define; maybe one with ACV status. At which point that system could be abused: a pub that is not likely to close gains ACV status to avoid rates.
    I think The Blocked Dwarf is using the term differently, to mean just those that have been bought by a group of supporters. I don’t know but I would have assumed the opposite, that they are businesses. Despite what they mean and do for the community they are still essentially pubs and open to outsiders.

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  4. To start with, any pub that is the only pub in a certain sized spatial area.

    Certain types of pubs in rural, suburban, or "back-street" inner city areas bring with them significant positive non-market externalities. Its perfectly valid for the government to seek to monetise those externalities in the form of subsidies or the waiving of business rates.

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