The amount of money lent by UK pub and bar owners to keep their own businesses afloat last year hit £138 million, according to research by private equity investment firm Growthdeck.
Their study shows that 1,730 UK pubs and bar companies have run so short of cash and other finance that their directors have had to make loans to them from their own personal resources. Many of those loans are for in excess of £200,000.
Many pub and bar owners were left with no option but to lend money to their own businesses to prevent them going bust, in spite of Government backed lending schemes such as CBILS and BBLS.
Pubs and bars, even those operating at a profit, have found it increasingly difficult to borrow over the last decade, as high street banks tightened their lending criteria for businesses they deem to be ‘high-risk’ borrowers and limited their lending to SMEs.
Owners of pubs and bars may have found it difficult to access funds through CBILs and BBLs as lenders favoured other sectors such as tech and healthcare. This is likely to have prompted more owners of pubs and bars to put their own money on the line.
Given the surplus of lower cost leisure space available, Growthdeck says there is scope for pubs and bars to see a profitable rebound, provided they have access to the funds necessary to enable them to grow.
The increase in domestic tourism, which saw a 35% jump in number of “staycations”, has been a boon to the UK hospitality sector. Sales in pubs and bars in August were 35% higher than the same month in 2020 and up by 5% compared to August 2019*.
Steve Talbot, Investment Director at Growthdeck, says: “The pub and bar sector has endured a difficult 18 months. Many owners have had to use their own money to stay in business as traditional funding options have been restricted.”
“However, the hospitality sector now faces a unique opportunity. The impact of the pandemic on the High Street has led to an excess of prime sites at attractive rents and much less onerous lease terms.”
“A lot of competition has been removed from the industry and the prospect of a bounce back in trading for the right concepts looks strong.”
Talbot adds: “Pub and bar companies with access to the right finance have an excellent opportunity to expand and grow. Investors should not underestimate the considerable growth potential of the hospitality sector.”