The UK’s pub giants are beginning to struggle because of a squeeze on earnings and rising costs, according to an industry stress test by ratings agency Moody’s.
Analysts said the sector was under pressure amid a perfect storm of rising business rates, labour costs and inflation, as well as falling beer consumption and fears about a consumer spending downturn.
Referring to the difficulty pubs are having in using cashflow to service their debt, Moody’s Thomas Rahman says: “Debt serviceability and leverage of rated transactions show early warning signals,” adding that the slowdown in consumer spending and a change in taste and fashions means pub operators’ earnings are being “curtailed”.
Aside from the weaker pound and the impact it has already had on inflation, Brexit poses a more direct risk to the future of pubs, as a large proportion of the food and drinks sold at pubs is imported. According to Moody’s costs are expected to rise by 5 per cent year-on-year until 2019.
At Beavis Morgan, we have extensive experience of working with clients in the hospitality sector and our professionals are acknowledged experts in issues affecting pubs, bars and restaurants. We are available to provide general business advice and to structure your business for tax. We can also assist with business plans and strategy execution, long and short-term forecasts, budgets, sensitivity analysis, and calculating and checking compliance with covenants.
Through our partner businesses, BM Structured Finance and BM Advisory, we are able to help with sourcing and restructuring debt finance for SME businesses, as well as assisting with resolving issues which can impact on business performance and success, and finding innovative solutions for businesses and individuals in distress.
Contact Matthew Burge or your usual Beavis Morgan Partner for further information about how we can assist you and your hospitality business.
