Small pub companies see turnover growth fall behind their larger rivals

Small pub companies saw turnover grow 23% slower on average than their larger rivals last year, as smaller companies continue to struggle to access the finance needed to boost growth.

Our latest research shows that small pub companies – defined here as those with a turnover of £25m or less – saw turnover grow by 4.3% in the last year, while larger companies saw turnover grow by 5.6% over the same period.

Smaller pub companies find it harder to get the funding needed to drive turnover growth, sometimes even for small sums to make basic improvements as well as bigger loans for new sites and acquisitions.

Capital investment in refurbishments, extensions and new kitchens is vital for pub companies to update their offering and bring in new punters.

Larger companies are also better able to access funding needed to pursue inorganic growth through acquisitions. M&A allows for pub companies to grow even more quickly and deliver bigger economies of scale.

There has certainly been plenty of M&A activity at the top end of the industry in recent years. For example, Admiral Taverns acquired 17 sites from Heineken in 2017 after the latter’s takeover of Punch Taverns earlier in the year, while bar and restaurant operator Drake & Morgan acquired Corney & Barrow Bars in 2016.

However, smaller companies find it much harder to engage in this sort of activity. This is because, on the whole, small companies are seen as poorer credit risks than their larger rivals by most high street lenders.

Despite a lack of funding from high street lenders, some small companies have still managed to deliver rapid growth, such as the retail arm of Scottish craft brewer Brewdog. Although an extreme example, it shows that smaller companies – with the right funding and branding – can thrive.

Typically, small companies have to make much more effort to seek finance or give up on some growth opportunities. The latter is more likely because the effort required to find other sensible sources of finance often seems too much of a distraction from the everyday running of a business.

For the pub industry to remain healthy, it’s vital that funding is made available to the smaller players as they represent the majority of the market. That’s why at Ortus Secured Finance, we promise to give pub companies or their finance brokers quick decisions on their funding requests.

However, industry wide, there is still more that can be done to help the smaller players.

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