Expenditure for pubs and bars continue to rise, despite strong sector health

Pubs and bars in the UK have seen capex rise by over two-thirds throughout the past 12 months, but their outgoing spend continues to rise, according to the latest Benchmarketing Report by the Association of Licensed Multiple Retailers (ALMR).

The report states that operators have been able to invest in their properties and services in the last year, aiming to take advantage of economic recovery and boosted consumer confidence. In total, sales across the sector were up by 5.8 per cent in the 12 months leading up to October 2012. In particular, community local pubs have been outperforming the entire market, with sales having risen by 7.6 per cent within the same period.

However, amongst all this good news, expenditure levels for pubs and bars continue to cause struggles within the market. Businesses operating under tied leases are reporting capex, margins and growth below average levels, and tied rents are eating into turnovers more than ever.

The average cost of running a pub has increased for the first time since 2009, with 48 per cent of turnover now being eaten up, a three per cent increase on last year, and an extra ten per cent being used for lease rent. This suggests that hospitality recruitment and community services may take a hit over the next year.

ALMR’s strategic affairs director Kate Nicholls said: “Cost control is a critical determinant of business profitability, particularly in the pub sector where it is a key variable in rent and valuation calculations. That cost control has come at a price, however, and the report shows that overall outlet net profit margins are extremely slim, meaning that the cushion to absorb additional charges from local authorities, government or suppliers remains stretched."

The ALMR Benchmarking Survey has been carried out annually since 2007.

Berkeley Scott is a specialist recruitment agency providing hospitality employment solutions.