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Is now a good time to invest in the UK pub sector?

13/05/2021

The UK pub sector is one that has suffered badly as a result of COVID-19 lockdowns. While our pubs and bars are now reopening (with restrictions in place, of course), not all have survived. The industry claims that only two in five pubs in England reopened in April, with an estimated 2,500 shutting their doors for good in 2020.

However, this doesn’t necessarily mean that those who already invest in the sector should withdraw their funds, or that those previously considering the sector should necessarily change their minds. As Graeme Smith of consulting firm AlixPartners says, “Operational real estate like pubs, and also hotels and student accommodation, are seen as a great way to play the recovery in the reopening, because they’re expected to recover very quickly and get back to good profitable levels of trading performance.” There are certainly signs of recovery from an investment point of view…

Job creation and takeover bids
The creation of new jobs in a sector that appears to have been struggling always seems to be a good sign. In April, Liverpool-based Pub Invest Group announced the creation of 500 new jobs, while Newcastle’s Inn Collection Group has created a further 200.

The UK’s pub scene is also attracting investors from overseas – particularly those from the US. Redcat Pub Company Limited has had an investment of £200m from US asset management firm, Oaktree, while earlier this year, Marston’s rejected a £666m takeover bid from Platinum Equity Advisors, believing that the figure seriously undervalued the firm.

The return to profitability
In February, a report from investment bank Numis on the UK pub sector stated that “There is significant pent-up demand in the pubs and restaurants sector which should see a swift return to profitability once reopening is allowed”. They highlighted the speed at which Australian businesses returned to “normal” after reopening – as well as the fact that pub closures during lockdown which means that supply will be lower, potentially increasing turnover for those who continue to trade. And with a VisitEngland survey revealing that 46% of respondents are most looking forward to a drink in a pub garden this summer, the future could be brighter than imagined for the UK pub sector.

Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.

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