Cost-trimming pubs the ‘engine of growth’

It found that pubs had stabilized their operating costs over the last year at 46.5% of turnover, while in the leased sector rent took an additional 11.3% share. It is the first time since the ALMR began its survey in 2007 that operating costs have stabilized, suggesting that pubs are now in a healthier position than for some time. ALMR strategic affairs director Kate Nicholls said: “These findings suggest the sector is back on track and has a strong base from which to grow.”

The ALMR found that cost control had been particularly apparent on the payroll, which was trimmed 5% over the year, and was especially marked in food-led pubs. The efforts have led to improved sales, which were up by 5% on a like for like basis in the year to October 2011—and by 8.5% among food-led operators. Companies with smaller numbers of outlets fared the best over the period, and across the board capital expenditure was up by 28%—evidence of widespread investment in operators’ estates.

The ALMR argues that having stabilized costs, pubs and bars were now very well placed to deliver jobs and economic growth. Nicholls said: “These findings reinforce our messages to government—we are an industry well able to generate jobs, invest in community facilities and play a full part in the Big Society. The fact that small, niche operators continue to out-perform the market demonstrates in spades that we are the real engine of growth and the best barometer of business and consumer confidence.”

But the burden of taxes and legislative measures risks scuppering the good work of the sector, said Nicholls. “The industry has pared costs back to the bone over recent years in all but one area—cost resulting from changes to legislation. The survey shows costs in these areas spiking—hefty business rates have fuelled 18% increases in premises costs and licensing reform has seen investment in security measures increase by a staggering 60%—and that is frankly unsustainable in the current environment. Retailers’ strong base for growth could be jeopardized by the imposition of further unsustainable costs arising from legislation.”

The ALMR’s survey report is published with the support of Barclays to help members assess their costs, margins and turnover composition. It is also approved by RICS, Parliament and Ministers and Pub Industry Code of Practice for use in rent setting and valuations. The ALMR is now planning a small seminar over the summer to analyse the results of its research. More details about the benchmarking survey can be found on the ALMR’s website.