Christie & Co is the UK pub sector’s leading specialist team of agents, valuers and consultants, offering advice on over £7bn of pub assets each year. Our corporate head office is based in London, and supported by a network of 15 regional offices throughout the UK, giving us an intimate knowledge of every local market.
Market overview - innovative operators continue to thrive
Operators both small and large found trading conditions mixed during 2017, with a combination of incredibly positive indications of health, along with the frustrations of legislation-induced cost increases such as National Living Wage rises and the business rates revaluation coming into effect in April 2017.
Yet on balance operators generally speaking enjoyed an excellent first half of the year as good weather brought people into pubs at the right times. Simultaneously, the weakened Pound drove inbound tourism across the UK, boosting the hospitality sector as a whole. Managed houses in the main have continued to trade well since, with strong Christmas trading, and tenanted pubs are becoming increasingly popular as both long term investments and low-cost points of entry for aspiring publicans to enter the market.
Innovation remains high within the sector, with a rise in the number of multiple operators – generally smaller and more agile businesses – delivering improved customer experience and returns as a result. Brewpubs and purveyors of boutique accommodation (i.e. high margin letting rooms) remained incredibly popular ways of diversifying a pubs trade and boosting both performance and value.
There was considerable interest from investors following the referendum on EU membership, which has created some attractive opportunities. Major deals included the long-anticipated Punch Taverns sale to Patron Capital and Star Pubs & Bars, and the sale of Admiral Taverns by US private equity investor Cerberus to C&C and Proprium Capital. Yet the market remains incredibly fragmented, and opportunities for further consolidation remain.
Outlook for 2018
We see operational and financial pressures in 2018 being broadly similar to those in 2017, albeit exacerbated by a further increase in the National Living Wage and the uncertain consequences of Brexit.
Some business failures are likely as we start to come down from the peak of the cycle, whilst successful operators and investors are likely to use this opportunity to expand.
More optimistic operators will continue to innovate, and many will not only survive, but grow and thrive.