Glass is looking half full as pubs and bars show signs of recovery
A year after a financial ‘perfect storm’ dragged many of Birmingham’s bars into financial ruin, investors are starting to look at the market again. Tom Scotney looks at why putting money behind the bar could be a profitable, if risky, manoeuvre.
The financial chaos that hit the UK last year looked even worse from the other side of the bar.
The collapse in consumer spending and competition from supermarkets selling bargain-price alcohol meant pub owners were in for a rough time, with already-tight margins squeezed to bursting point –and beyond.
And while the travails of the large national pub companies burdened with debt has been regularly recorded, the recession had just as devastating an impact on the smaller-scale investors and companies that were behind many of Birmingham’s high-profile bars.
The financial trouble many pub and bar owners found themselves in carved a swathe across the drinking scene in the city centre. Some bars – including Bar 110 and the Living Room – simply shut up shop, while many more went collapsed financially before being rescued out of administration.
Most notably, the collapse of the Birmingham-based Bar Room Bar chain wiped in the region of £16 million from the books of its financial backers when it collapsed almost exactly a year ago after just a year in business.
But since then, the tide has started to turn for investors looking to put money into bars.
For a start, the fortunes of the bars themselves have started to turn around, with customer numbers improving as consumer spending starts to go back up.
Karen Paris, the general manager at Cornwall Street office favourite Metro, said: “It’s been ok since Christmas, we certainly can’t complain. We did see a drop in figures last year though.
“We are very business-oriented, especially with where we are in Birmingham, and it seems to be picking back up.”
She said the drop in business from professional customers had been spread fairly equally across food and drink sales at the restaurant and bar.
And while the leisure sector is still seen as a risky business for the majority, some investors have started to dip a toe back in the market after the end of the annus horribilis for the industry.
Law graduate Balwinder Thukral has built up a small empire of four pubs in and around Coventry. He said that the problems at large pub companies and trouble in the market did not mean there were no opportunities for smaller investors.
He added: “Everyone is criticising the pub companies but we are still having a hard time. It doesn’t mean because we are a free house we have an easy go of it, we’re still struggling.
“Everyone is struggling but tenant landlords are struggling more because of the tie. Take Punch Taverns for example, they have £3.5 billion of debt but the value of their business is only a fraction of that.”
Mr Thukral is not the only businessman to see an opportunity in picking up bars.
Last year Paul Bassi – a well-known business figure and one of the Midlands’ richest men – bought the UK franchise for the Asha’s chain of bars/restaurants.
The bar at the outlet on Newhall Street in Birmingham, which is the only one so far in the UK, is a popular spot for professionals in the surrounding business area.
At the time he bought it, Mr Bassi said he saw the investment “very much as a long term business”, and said there were plans to expand the franchise around the UK.
And even Ross Sanders – the entrepreneur behind the Bar Room Bar chain that caused so much consternation in Birmingham’s financiers – has been back in the game, acquiring and opening a string of new pubs in urban and rural areas.
