Wednesday 1 November 2023

At the sign of the Dead Horse

Following the case of the fire and subsequent demolition of the Crooked House, West Midlands Mayor Andy Street has called for nominations for pubs that deserve additional legal protection. That’s all well and good, but it has to be remembered that the best protection for pubs is for people to actually use them. Those who claim to be campaigning to support pubs often seem to fail to acknowledge how much the trade has declined in recent years, which inevitably will render many unviable.

Nobody who follows this blog can be left in any doubt about my enduring love of pubs. As I wrote back in 2010:

At heart I have to conclude I’m more fascinated by pubs than beer – by the variation in layout and architecture, the fittings from many different eras, the ebb and flow of trade, the little rituals and quirks of pub life, the mix of customers, their interaction with the bar staff and each other, the way their clientele and atmosphere reflect the varied strands of society. Every pub is different and has its own character and its own story to tell.
I have also devoted a separate blog to highlighting some of the best pubs I have come across.

However, it is important to be realistic and not look at the subject through rose-tinted spectacles. One of the core themes of this blog has been to highlight the various trends that have combined to undermine pubs and reduce their role in society. Obviously one of the biggest factors, and one specifically down to government action, was the 2007 smoking ban, which really ripped the guts out of wet-led community pubs. There has also been an ever-increasing stream of official messaging about the dangers of drink, which is inevitably going to have an effect on public attitudes. If people do drink, very often they will prefer to do it in private homes rather than public places.

But much of it is due to changing social attitudes, which mean that going out to pubs for a drink is looked upon much less favourably, alcohol consumption is more stigmatised, and many occasions on which people would once routinely visit pubs are now frowned upon. As I wrote back in 2013, pubgoing as a leisure activity has increasingly become socially unacceptable. It also has to be recognised that, in the past, much of the core trade of pubs came from men – and it was overwhelmingly men – who were in there several nights a week drinking multiple pints. The number of jobs where you can get away with that, or indeed afford it, has much reduced, and it’s viewed much more unfavourably. Maybe in wider terms that is a positive trend, but it doesn’t help the business of pubs.

It’s a basic principle of economics that, in broad terms, the value that is put on land and activities reflect their overall benefit to society. Of course this cannot be viewed in isolation, and the impact on others has to be taken into account, such as, for example, avoiding pollution and preventing the building of properties with direct access to motorways. But, as a general principle, resource allocation is done much better by markets than by central direction.

If there is an underused pub occupying a large plot of land in a city, at a time of housing shortage it may well benefit society as a whole to knock it down and build flats on the site. Thus it would command a much higher price as a development site than as a going concern. If there is a demand for a pub or bar in that location, it can be provided on the ground floor of the block.

If the pub is of particular architectural quality or significance, it can be protected by being given Listed Building status, which gives it much more protection from alteration or demolition. This, in a sense, is a luxury that prosperous and civilised societies can afford, to be able to retain buildings for cultural or historical reasons even if the site could be used in a more economically advantageous way. There is always the issue, though, of finding a use for listed buildings, unless they can be presented as tourist attractions. Domestic buildings can normally be used for their original purpose, but if a pub has its interior listed as well as its exterior it cannot realistically be used for anything else. And there is a problem with large industrial or institutional buildings that have been listed, but for which no alterative use can be found.

If a pub does not qualify for listing, then it can be given some measure of protection through the planning system. The first option is to apply for it to be registered as an Asset of Community Value, which can be done if it can be demonstrated that it has played a part in the life of the community over a period of time. This does not prevent redevelopment, or change of use, but forces it to be considered in the planning process and gives the local community a six-month window of opportunity to raise funds to purchase it, although there is no obligation on the owner to sell.

To some extent this has been superseded by a relatively recent change of giving pubs their own specific use class for planning purposes, which means that any change of use or demolition has to be given permission by the local council. However, planning can only stop things from happening, it can’t actually make them happen. No operator can be forced to keep a pub open against their will. There is nothing to stop the owner simply closing a pub they do not consider to be viable, and then engaging in a Mexican stand-off with the council over its future use. Local campaigners will often put pressure on councils not to approve a change of use even if there is little realistic prospect of the building continuing to be a pub.

In some cases, it’s possible that a new owner and a change of format might breathe new life into a pub, but to what extent is that simply redistributing the customers from other pubs rather than growing demand overall? And it’s very hard to see many of the “beached whale” estate pubs having any future whoever took them over. It is this kind of planning sclerosis that leads to “mystery fires” when unscrupulous owners try to force the council’s hand. (I am not in any sense trying to excuse what happened at the Crooked House, which was prima facie entirely illegal and probably, from the point of view of the owners, self-defeating.)

It would, of course, be possible to go one step further by requiring any owner wishing to dispose of a pub to at first offer it for sale valued as a going concern for, say, a period of six months. However, this would simply tend to lead to owners closing pubs and sitting on them until any prospect of them appealing to alternative buyers had evaporated. Humphrey Smith is an expert at keeping pubs closed for years at a time. There would have to be a qualifying time period, as otherwise if your micropub in a converted shop failed to prosper, it would be much more difficult to change it back into something else. Plus there would be the question of who would eventually receive the development gains if, after one or two more throws of the dice, it did not prove possible for it to operate as a pub. Realistically, all this would do is to prolong the agony.

If cherished pubs can no longer be sustained on a commercial basis, then if people feel strongly enough about their loss they will need to stump up their own cash to take them into community ownership. This is a growing trend across the country and it is to be welcomed as a way of keeping pubs in existence. But it must be recognised that, once it has been bought, a pub must be able to operate profitably, otherwise it will be a continuing cash drain on the community. Actually buying the pub is only the beginning of the battle. I have also suggested in the past that CAMRA could set up a kind of National Trust of Pubs that could aim to acquire pubs on its National Inventory of Historic Pub Interiors that are no longer able to operate commercially. Pubs will increasingly have to move from the business sector to the heritage sector.

Ultimately, the shadow hanging over pubs is not one of lack of supply, but lack of demand. If you want them to survive and prosper in future, you would be better off spending your time promoting the appeal of both pubs and moderate social drinking, rather than engaging in a constant rearguard action of fighting planning battles.

The header photo is of the Black Horse in the Stapenhill district of Burton-on-Trent, an impressive inter-wars Art Deco pub that has since been replaced by housing.

22 comments:

  1. Have I missed something? Six people have been arrested on suspicion of conspiracy to commit arson but none seem to have been charged. Of course there are suspicions that the owners of the pub had something to do with the fire but you have essentially stated that as a fact. I think that you should reconsider what you have written.

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    1. I do say prima facie, but I have slightly rephrased the comment so it cannot be interpreted as a direct accusation.

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    2. Excellent analysis Mudgie. The missing piece of the jigsaw - a hobby horse of mine admittedly - is the effect of the beer orders which separated pubs from brewing and heaped debt on a pretty much debt free industry. This gave rise to pubs being sold for redevelopment as that serviced the debt. Coupled with the problems you outline, it was another nail in a pretty nail rich coffin. But as you say, when supply outstrips demand something has to give. Pricing people out of pubs - including those who run them isn't helping at all.
      It was disappointing that the government has decided not to investigate the tied house system further. The tie to a brewing company is probably justifiable, but to tie to what is in effect a number of property companies isn't.

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    3. The business of pubcos is essentially running pubs, so if you prevented them from operating conventional tenancies their reaction would probably be to convert the best ones to management and sell off their remainder, with no guarantee they would remain as pubs. And, in many family brewers' pubs, such as Robinsons and Hydes, at least 75% of the beer sales aren't their own production, so conceptually they're not all that far removed from non-brewing pubcos.

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    4. Cookie does the numbers2 November 2023 at 11:37

      2 types of public company "pub company" capital structures. Company A mainly equity and Company B mainly debt.

      Company A owns pubs that are giving a poor return compared to the asset values of the pubs. They cut dividends, reducing the price of the stock. They attract asset strippers to buy the companies stock with a view to realising the value of the underlying assets. The assets are disposed of.
      Company B owns pubs that are giving a poor return compared to the asset values of the pubs. They cannot cut interest payments so need to realise the value of the underlying assets themselves. The assets are disposed of.

      Debt or equity, the public company need to utilize the value of the assets or they will lose those assets.

      There is also a Company C. Private, not public. Owned by the descendants of the founder. Mainly equity. Also owns pubs that are giving a poor return compared to the asset values of the pubs. They cut dividends. Cousins grumble amongst themselves. They wonder whether its worth disposing of the assets. What else is there to invest in? It might be worth sitting on a pile of closed pubs and see what happens to real estate in a few years. All sorts of development ideas are occurring for town centres and railway stations. Why not just keep them on the books for now?

      Debt v equity is less of a factor than public v private when it comes to the pressures on a company to get a return on assets or dispose of them to those that can.

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  2. Let's face it, it's all over, pubs are dead.

    People have better things to do. We live in more comfortable homes, with cheap drinks from the supermarket. Blokes used to pub-it to get away from the wife. Now we have gyms, coffee shops and smartphones. People only flock to honeypot town / city centre outlets.

    Times change, habits change pass times change. Do people change? Not much. But their needs are better served than dinosaur pubs. Sad for those that like them I guess.




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    1. They'll always be a few pot bellied hobbit like men in goretex that want to go and sniff weird beer in a converted bookies and give it a "pub" award in return for a cheese sandwich. Pubs will live so long as the few persist.

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    2. Well I don't want to drink with people like that. They sound like right old old balls, why on earth would they sniff beer. If you mean the Micro Pubs I have been in a few of these. I think that is where pubs are going. It confirms the economic/property pricing theory you suggest. Bring the costs down to meet the declining income. Just not keen on the gortex oddballs though and a lot of them have only one toilet. Oh, and all the talk seems to be about beer. I avoid them. Love a cheese sandwich though

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    3. Why be so rude about Goretex? It's a great product for both outdoors junkies, who just so happen to drink real ale. Better than that North Face crap

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    4. There's a rumour that the founders of CAMRA discovered an unpublished manuscript where Frodo & Bilbo set up a campaign for hobbit ale and Gandalf joins to get a discount on his grog.

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    5. There's a rumour that CAMRA won the war but lost the peace. Pubs sell beer. Not taps, not supermarkets, not beer itself.

      “From the towns all inns have been driven; from the villages most … Change your hearts, or you will lose your inns, and you will have deserved to have lost them. But when you have lost your inns, drown your empty selves – for you will have lost the last of England.”

      Did Frodo and Bilbo wear Goretex?



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  3. If a plot of land in worth a million as redevelopment as flats would that be it's market price? A valuation of business turnover multiplied by business sector constant would value a pub much lower

    Creates a game of last owner wins, as only then can you realise the actual freehold value. To be the last owner, you have to keep hold of the freehold and not let it go for the undervaluation of priced as a pub.

    Creates an incentive for the freeholder to keep hold, put a useless tenant in charge and wait until the council accept its a failure, after multiple tenants prove its unviable. If they are stubborn, find a tenant so useless they'll leave a chip pan on.

    There's no game that can be played with planning and selling prices. A pub has to justify the value of the land it's sat on. Pubs have to be valued higher if you want to keep them. That means you all have to accept it's £20 a pint and go neck 5 pints a night. Then pubs will be goldmines worth more than flats and shops.

    That pubs have such low value is indicated by so many new ones being cheap refurbs of otherwise unlettable shops.

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    1. That was just a thought experiment - it's certainly not an idea I support. Unless the development gain was retained by the original owner, then it would indeed be a game of last owner wins.

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  4. Pubs have never been in better health. More breweries than ever, more new micropubs, more CAMRA members. This is real ale nirvana. Who cares if the plebs sit at home drinking cans of Madri? There's never been a better time to drink pongy ale or be a pongy ale aficionado.

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  5. I knew pubs were about finished when I was served by a sulking trans person. On the positive side, many of those che guevara t-shirt wearing old boys seem to have died off.

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  6. "If cherished pubs can no longer be sustained on a commercial basis, then if people feel strongly enough about their loss they will need to stump up their own cash to take them into community ownership." - Didn't CAMRA once own a couple of pubs?

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  7. Can always rely on the “pub curmudgeon” to take the side of greedy property developers rather than… pubs

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    1. I wouldn't normally approve antagonistic anonymous comments, but that deserves a reply. I'm not on the side of property developers, but on the side of reality. As I say in the post, you can't force unwilling owners to keep unprofitable pubs open. What would you do about it?

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  8. I would suggest that "last owner wins" is the main reason pubs still exist in reasonably large numbers. The true value of the assets lie with the land they sit on. Well run pub businesses can generate a healthy return, failing ones will always have the backup of a redevelopment to another use.

    Banks are not too bothered by the level of debt, as they know the value in the long run will be in their favour.

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    1. In the case of landlocked pubs on declining high streets, there probably isn't much redevelopment value.

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  9. Cookie's got his calculator out3 November 2023 at 16:04

    Individual nation trust membership if £84 a year as per their website. Lets make the Pubs Trust £100 a pop to make the arithmetic easy and set about a goal to buy a freehold pub in year 1 with a budget of a million a pop inc bringing it up to a tradable standard and finding a tenant that wants to rent it and run a pub from it. No beer tie but a contract to run a pub to a standard and keep his bitter in decent nick. Rent always higher than maintenance cost, maybe below market rent to keep the pub viable if its gonna be a trad old mans gaff, but a surplus to feed into the fund to buy Pub 2 in year 2.

    That should cover heritage pubs where the real estate values make it worth a chip pan fire.

    We need 10,000 members. I'm in, You're made of money so I guess you're in. 9,998 to go. How many read this tosh that want to piss a ton away on your dream?

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  10. Excellent read, and as usual Cookie and the Tand are spot on as well.

    Give the "regular customers" of these popular pubs 6 months to arrange the finance to buy these poorly-run goldmines. The Good Beer Guide loves them; the answer to my question "How did this gastropub with creche run for locals get in the GBG ?" is always "Community pub".

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