Morgan & Clarke, October Newsletter 2017

By | November 24, 2017


Pigeon House, The Broadway,

Oakridge Lynch, Stroud, Glos. GL6 7NU

Email: Phone: 01285 719292 and 01285 760370

(Also at: London, Cardiff, Braunton, and Lewes)

OCTOBER 2017 NO. 59

There has been an untimely break in continuity for the issuance of our regular Newsletters, due almost entirely to a massive pressure of work and sustaining the associated level of quality and accuracy that we hold very dear. Not that that level of work has in any way diminished but such a vital number of economic and industry events have occurred in the last few months that time has been found to again “spread the word”.

Morgan & Clarke have always been deeply involved in rent review issues amongst the many other disciplines for which we are renowned. To state the self-evident, the art or science of rent review which is almost always undertaken on a profits’ test basis (Wetherspoons’ square footage related valuations excepted), the exercise is one of looking forward into either the next three or five years until the next rent review. The rent agreed now must continue to be affordable over that fixed period and due allowance made for the recurrent factor that rents are being artificially inflated in many cases as a result of annual indexation.

On that point, the annual rent rise indexation is always linked with the Retail Price Index (RPI). The RPI twelve month rate, January 2016 to January 2017 is recorded at 2.6%. However, that year-on-year statistical analysis must be put in context with the latest RPI release for October 2017 which is 3.9% and a year-on-year forecast of 4%. Simple maths here! If you extend that over a five year period with no compounding, a rent could increase by 20%. This must be borne in context with the settling of a current rent review. Even the Consumer Prices Index linked to owner-occupiers housing costs where the twelve months’ inflation rate was 2.8% in September 2017 was only as high as this rate way back in March 2012. Both rates are at alarming high points.


It’s all very well confirming a selected number of trade operators’ increases in annual sales. Generally these are between 1% and 6% maximum. However, the trotting-out of increased sales does not confirm profitability as bottom-line profits are rarely released. The creation of a “roses round the door” warm economic feeling is, to a degree, wholly misleading.


To quote from an article in the PMA on 16 October which reported the Coffer Peach overview, specifically concerning London, which is always seen as a special trading market almost unique to itself:

“London Restaurants saw like-for-like down 3.2% in September; Britain’s managed pubs, bars and restaurants saw like-for-like sales decline 0.9% in September as the public appeared to pull back on spending on eating and drinking out. Restaurants in London were worst hit suffering a 3.2% fall in collective, like-for-like sales compared to September last year.”

We have been undertaking a number of rent reviews where the pubs concerned are effectively operating as restaurants. We always have the view that if sales are over 65% dry, then the property is more of a restaurant than a pub. One of the telling items we have been asking is the percentage of bookings that are received for either a Friday or Saturday night. Are they the same? Are they up or are they down? It is a significant statistical analysis that is hardly ever noticed, but very telling. Both in London and in other parts of the UK (excluding Scotland and Northern Ireland as we don’t venture that far), the underlying reaction, which has even been as some surprise to our numerous Clients when analysing the statistics, is that reservations for Friday and Saturday night eating out are almost uniformly lower than the same period last year, some as much as 30%.

Commenting on the state of the current market, we can quote from an article by Alexander Peace, the Estates Gazette – Retail and Leisure/Pubs/Autumn 2017 – for which we are very grateful.

“(continuing viability) part of this is due to a growing abstemiousness in the UK population and part of it is due to changing youth habits. But perhaps most importantly is the cost of alcohol and the fact more people drink at home and young people are less inclined to go out thanks to the rise of dating apps. Why bother going out when you can get a date at home from your iPhone? Millennials are also more health conscious than previous generations and if they go out, they drink less. A survey by Heineken in 2016 found that on a night out, 75% of millennials will opt to drink in moderation.”

In the process of undertaking a pub rent review in Notting Hill the other day, and it may come as some surprise to our readers who are not familiar with London Bar Prices, that the following represented a fairly standard price structure.



Stowford Press










Old Rosie


The comment from the publican was that well  sales are holding up, sort of.


You may be aware that the Bank of England is becoming concerned about increasing debt levels. This was further confirmed when the Governor, Mark Carney, made an appearance at Committee level in the Houses of Parliament on 17 October to voice his concerns. A recent Bank of England survey or credit conditions amongst retail banks suggests the following:

The Report found that a net balance of 28.6% of lenders said they planned to make less unsecured credit available in the next quarter rather than more, which is the lowest balance since the depths of the global financial crisis in 2008. This tightening has already started with the Report showing more lenders had restricted the flow of secured credit, which of course includes personal loans, overdrafts, car finance schemes and, most importantly, credit card debt over the last three months than at any time since 2009.

Going back to our survey of the bookings level in pubs that operate more as restaurants, it is a given that a large number of restaurant bills are settled by credit card. The conclusions are self-evident as the flow of consumer credit has helped to sustain household spending which, in turn, has automatically fuelled economic growth. Any tightening is likely to hit personal cash availability which will certainly be a negative factor of the discretionary spend in the leisure industry.


This has been a litany of bureaucracy, frustration and, at times, mind-numbing procedural delays. It would seem that even the Business, Energy & Industrial Strategy Committee has now lost patience with Paul Newby, the Pubs Code Adjudicator. The Clerk to the BEISSC, Chris Shaw, has confirmed that the letter from Rachel Reeves MP, Chair of the BEISSC, has written to Paul Newby on 10th October and that that letter has been openly published on the BEISSC website which can be found at:-

Please see the full article on :-


This market overview has the semblance of doom and gloom not least concerning economic outlooks and the genuine slowing down, in evidential terms, of the discretionary leisure spend in our market. However, all is not so bad as it would seem if one simple objective is recognised. In our minds, that is called the presumption of reality. This means a degree of understanding and give-and-take between both landlord and tenant. It needs a reverse of the mind-set that at times still largely prevails which was once summed-up by a senior pubco employee in an off-the-cuff remark. You know what, tenants are all the same on the make, on the take and robbing us blind. We are a property company that happen to own pubs. They deserve all that they get.

We have a slightly softer view in that pubs can still thrive if the tenants are allowed to make a solid living. This must include having sensible rents and sensible discounting and, above all else, help and assistance if matters genuinely don’t turn out as either side financially expected. It is quite pointless having a financial rescue package in place for, say, six months and then taking away the help and assistance and going back to where things were. This and other related matters will be covered in subsequent newsletters.

And, finally, to lighten the mood a little, a couple of choice one-liners.

Whenever someone says I don’t believe in coincidences, I say my God, neither do I.

I have two boys five and six. We are no good at naming things in our house.”

Best Wishes from the Team at M & C


Phone: 01285 719292 and 01285 760370

20th October 2017.

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