UK Pub Sector – Q2 2022 trading update

UK pubs in for a bitter year as inflation and staff shortages continue

In an Interview with Third Bridge Forum, the specialist said pubs are currently running at 80-90% capacity due to staff shortages – rather than reduced demand. They told us that there are approximately 1.2 million vacancies in the UK pub sector, and that pub bosses are “holding back” on covers in an effort to reduce staff pressures so they do not resign.

We heard that despite recent healthy like-for-like sales figures – including double-digits in food – these figures are not enough to cover cost increases, which are “going through the roof”. The specialist said food-led pubs are better positioned to pass on price increases to customers than wet-led pubs. However, we were told they are also more susceptible to rising labour costs. The specialist warned that passing on every increase to customers is “not sustainable” and risks making a night at the pub “too expensive” – potentially moving customers’ money from pubs to takeaways. 

Meanwhile, independent pubs are expected to “really struggle” with cash flow issues in H2, according to the specialist. They envisage a failure rate in independent tenanted businesses of 10-15% compared to 5-8% in a “good year”. The specialist said this year could be worse for independents than during the COVID-19 pandemic given government support has ended.   

Over the next 6-12 months, the specialist said spend per head could grow, with the FIFA World Cup in November expected to help wet-led businesses. The event’s winter switch, however, does not help food-led pubs and could cause businesses to choose whether they focus on sport or food during the month-long competition. 

The specialist is “bullish” on the prospect of M&A activity by Greene King, Fullers, Marston’s Brewery and Admiral Taverns over the coming 12 months. In particular, we were told to watch out for a potential Punch Pubs & Co–Amber Taverns acquisition, with the specialist calling it a “good deal” for both parties. 

Despite these challenges, the specialist told us UK pubs are “resilient” and have recovered from numerous setbacks in the past. While they expect this year to be “tough”, they were confident publicans would be raising a glass to a “good year” in 2023 if they can successfully navigate current headwinds.   

Click here to access all the human insights in Third Bridge Forum’s “UK Pub Sector – Q2 2022 Trading Update & Cost Impacts” Interview.