The UK's pub industry has suffered badly in the recession, with around 50 bars now believed to be shutting every week. Christopher Knox looks at the sector in the run-up to Christmas and speaks to two of the region's publicans who still consider their glasses to be half full.

THOUGH some sectors may believe the downturn is bottoming out, the pub industry has had to cope with ever more bad news over the last year as consumers continue cut back on spending.

Figures from the British Beer and Pub Association (BBPA) show that while overall beer sales are stabilising, pub sales declined 4.7% in the third quarter of 2009, equating to 4.3 million fewer pints being drank each week during July, August and September compared to the same three months last year.

And new research also shows alcohol consumption is falling at its fastest rate for more than 60 years, with the amount consumed weekly by the average pub-goer falling by more than 8% to 3.81 litres during the first half of 2009, compared with 4.15 litres in the same period last year.

On first glance, many may welcome the figures as signs of the excesses associated with the drinks trade are at last being curtailed. However, most industry experts agree it is in fact the average consumer venturing out for a quick pint or two that is bringing the figures down.

Neil Williams, communications manager at the BBPA, said: “The pub industry still faces the worst parts of a recession, the magnitude of which we have not seen for over 60 years.

“Our members are under all sorts of pressure at the moment as they enter the important Christmas period, either through falling trade, increased business rates or higher VAT on alcohol preventing smaller traders from remaining competitive.”

The subject of VAT is a sore one for landlords, with the majority regarding recent increases as a series on punitive measures as they see a 20% hike over the last two years.

Last year’s pre-budget report announcement that overall VAT would be temporarily reduced from 17.5% to 15% was offset by a further 8% increase in beer duty.

Publicans have been hoping for an early Christmas present in next week’s Pre-Budget Report and withdraw the 8% increase in line with the reinstatement of the 17.5% VAT in January.

BBPA chief executive Brigid Simmonds said: “Our latest figures signal that overall beer sales are beginning to stabilise, but beer sales in pubs continue to decline, contributing to a pub closure rate of 52 per week.

“This is a fragile situation, that could be jeopardised by the wrong decision on tax in the forthcoming pre-budget report. Beer sales are the backbone of Britain’s pubs, which employ thousands, and act as the hub for many communities.

“We have already suffered beer tax increases totaling 20% on the past two years – a tax increase of £600m during a record recession.

“Further punitive tax increases could snuff out any recovery, with further job losses.”

One of the biggest casualties of the North East pub trade this year was pub, club and restaurant operator Premium Bars and Restaurants, which went into administration after a deal with the billionaire Reuben Brothers fell apart, which saw 54 workers’ jobs axed as a result of the immediate closure of three of its 48 outlets, including the Rewind bar in Newcastle’s Bigg Market.

PBR, which is currently being purchased by Hertfordshire-based The Orchid Group, racked up debts of more than £40m, mainly as a result of its purchase of the 13-strong Living Room restaurant chain in 2007 with £32m of bank lending.

Although the group had its particular problems, it does illustrate the precarious nature of the industry and the pitfalls of heavy investment in high profile city centre chains.

John Weir, managing director of 10-strong North East pub chain Weir Inns, says: “You have to be careful about the location of your pubs as certain types of venues are holding up more than others.

“Also, landlords that are tied to specific breweries often run into trouble when it comes to diversifying their range or pricing their drinks.”

“That is why all of my pubs are all freehold and managed, as this gives me more freedom to make the changes necessary to stay one step ahead during the recession.”