THE GIST
British publicans are being forced over a cliff, as the government rushes to get pubs open again despite the prospect of huge losses.
With the government’s current furlough scheme starting to wind down and debts mounting as landlords resist offering any rent discounts, U.K. publicans are desperate for clarity on when they can open and what rules they will have to follow to avoid spreading COVID-19. So far the government has been unable to provide either while daily infections are still over well 1,000.
In May—with daily COVID-19 deaths still in the mid-hundreds—Prime Minister Boris Johnson surprised the nation by announcing plans to open all licensed premises on July 4. This was, however, quickly undermined by government leaks to the Financial Times that implied pubs with outdoor spaces might be allowed to open June 22. As the government backpedalled from that position, it was then rumored that the original July 4 date might only apply to those pubs with gardens and patios.
The back-and-forth and lack of clarity aren’t even the biggest issues. Instead, it’s the changing social-distancing guidelines that will underpin those shifting dates. Current government guidelines require employees and customers to remain two meters (around six-and-a-half feet) apart at all times, with the exclusion of direct service. However, the U.K. pub industry operates on razor-thin margins that require packed seats and fast turnover to be profitable due to high rents, duty and business tax rates, and beer prices. The two-meter requirement would reduce vital capacity and force thousands of pubs to reopen while knowingly setting themselves up for revenue loss.
In response to criticism, Johnson promised a review of social distancing measures that could result in a reduction to one meter (just over three feet), but in keeping with how much confusion has already been sowed, he said the findings would not be made public until after the pubs are due to open.
WHY IT MATTERS
Industry bodies have repeatedly reminded the government that pubs need at least three weeks to prepare to open. It’s now just barely two weeks until Johnson’s July 4 deadline, and most publicans and landlords are assuming the worst—a sudden opening at two metres, while being left in the dark until the eleventh hour on practically all other guidelines regarding the health and safety of staff and patrons.
The situation has divided the industry into two camps:
One side is calling for more financial support for the hospitality industry to make the two-meter system viable.
The other is calling for social distancing to be reduced or scrapped altogether.
Both, however, are calling for greater clarity so they can at least prepare. Bringing staff back from furlough, cleaning lines, filling cellars, and preparing the spaces for social distancing is a long and costly process.
Kris Gumbrell, chief executive of the Brewhouse & Kitchen, is aiming to open his chain of 22 brewpubs in phases starting July 4. He has spent around £60,000 on plexiglass shielding, but says he only needs “half that” if social distancing is reduced to one meter. He’s running out of time to amend the order.
Many pubs, however, are simply unworkable without that reduction due to the loss of capacity. Gary Murphy, who runs the Ye Olde Mitre Inne in Barnet, North London, says it doesn’t matter when his pub can open—with two-meter social distancing in force, he’d lose more being open than he would while closed, despite being charged full rent by his landlord, Greene King, throughout lockdown.
“The numbers just don’t add up,” says Murphy. “I rely upon high volume at certain times like Friday and Saturday nights. I need 100 or more people in there as that’s when I take 50% of my takings.”
The current plans put Murphy on a collision course with Greene King, which could try to force him to open. Greene King manages 1,700 pubs itself, and has made an announcement about the onerous changes it will implement. The private-equity-owned brewery recently said it would only charge Murphy 10% rent until he can re-open, but gave no clarity on whether that meant it was the government’s deadline or Murphy’s own decision that would impact that monthly cost. Murphy says he won’t reopen until social distancing is abolished or reduced to one meter, and if he’s forced to open he’d submit to Greene King that the site was not “fit for purpose” and wind up his business for good.
Murphy’s case is typical of British pubs, which are often centuries-old and naturally not designed with pandemic response in mind. All over the U.K., businesses are wrestling to retroactively outfit their sites to meet new social-distancing guidelines, with the costs further reducing their chances of turning a profit. Greene King chief executive Nick Mackenzie admits that adaptations won’t work at all sites, and Murphy illustrated the practical issues in a post on Twitter that used a tape measure to show how few areas of his 450-year-old pub were even 2 meters wide.
Despite this, many in the industry believe reopening pubs is key to both the economy and a return to a normal way of life. Charlie McVeigh, who sold his chain of Draft House pubs to BrewDog for £15 million and is an investor in several chains, is behind an initiative petitioning the government to open pubs “as soon as it’s safe.” His Free the Pint campaign doesn’t officially clarify what it regards as “safe,” but McVeigh says opening pubs while social distancing remains in place would be “very difficult,” implying he wants the policy scrapped.
“If the government believes—as I do—that it’s now safe to go outside the house, then the messaging needs to change to reflect that so people can make an informed choice about whether they go to the pub,” says McVeigh.
McVeigh adds that the “fear of going out” caused by confused government messaging could reduce sales when the pubs are allowed to open—clearly unaware that the campaign’s lack of detail around safety may add to the confusion.
Despite this, Society of Independent Brewers (SIBA) chief executive James Calder has backed the campaign assuming the government reduces social distancing to one meter. His backing could be seen as dismissing the views of his members, 28% of whom will not open their own venues until a vaccine is developed or the R number—a metric that represents the average number of people a person with COVID-19 will go on to infect—drops further. The current R number in the U.K. is just shy of 1, which means every infected person is likely to go on to infect one other individual.
Tom Stainer, chief executive of CAMRA, disagrees with the Free the Pint initiative’s motives, and believes that uncertainty around safe social distancing is a reason to delay opening pubs, rather than accelerate the timeline. He believes that pubs should be given more financial support, rather than being expected to open at loss-making levels of trade.
“Consumers are looking for reassurance,” says Stainer. “We’ve done surveys among members, and confidence in going back to the pub increases when you say ‘two-meter distancing is in place.’”
Pubs that refuse to open in July can’t delay forever, though. The government has given no indication that it will give further grants to struggling businesses like it did in March, and a furlough scheme covering staff payroll will close at the end of October.
Whether social distancing is at two meters, one meter, or abolished completely, sales are expected to be down even once the pubs open. As a result, Murphy is demanding rent reviews for all tenanted pubs in the U.K. Pub rents are based on the potential volume sales, and with these severely restricted, many pubs will be paying unsustainably high rents based on turnover from before the COVID-19 pandemic.
A court case against Marston’s that could result in thousands of rent reviews is currently going through the High Court, but won’t be resolved in time to save the thousands of pubs facing the unenviable choice of slowly going under while closed, or going under quicker while open.
Words by Jonny Garrett