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Supporting our leased and tenanted pubs through COVID-19
Over the last year pubs across England, Wales and Scotland have been closed, or subject to regional restrictions, due to the COVID-19 pandemic. In addition to all the Government’s support to help cover rent, salaries, and other fixed costs, Star Pubs & Bars has – and will continue to provide – rent concessions to our leased and tenanted pubs. This page outlines how we have calculated those rent reductions for existing licensees. In addition to rent concessions, we have also invested £250,000 in health and safety point of sale materials for our pubs and supported our licensees with advice and guidance for our pubs.
Context: Government Support
The Government has provided a significant support package for the pub sector through the COVID-19 crisis. So even whilst pubs have been closed, they still have an income during the closure period. That support includes cash grants for the retail and hospitality industry, the job retention scheme, the job support scheme, business rate relief for a year, business interruption loans, business bounce back loans and more.
Alongside the Government’s wider support for the pub sector, each pub across the UK has been affected very differently by the Government’s support package. As we have a very large and varied estate of 2,500 pubs, our approach to supporting our pubs with their rent has therefore been conducted on an individual basis in a fair and equitable way. Each pub within our core leased and tenanted estate* has been offered a rent reduction based on their individual circumstances.
Calculating rent concessions – our methodology
We’ve developed a model which uses turnover and profitability data by pub type (as defined by BBPA benchmarking criteria), takes out costs for the closure period (such as reduced marketing spend and professional fees, no Sky/BT bills), and factors in recent Government support (as listed above). In terms of the turnover and profitability data by pub type – we have applied some principles based on turnover (including the Government’s grants of £25k, £10k as well as those with no support) and then overlaid different costs as per the BBPA benchmarking criteria. These are also based on the fact that pubs are shut and therefore will incur lower costs. Different rent and rent concession scenarios were applied to understand the impact on pub profitability over a 12-month period.
March – August 2020:
This analysis was used to inform our initial rent concession scheme:
- Pubs receiving a £10,000 Government grant were offered a 75% rent concession (paying 25% of the contractual rent).
- Pubs receiving a £25,000 Government grant were offered a 50% rent concession (paying 50% of the contractual rent).
- Pubs receiving no Government grant inside Greater London rates districts were offered a 75% rent concession (paying 25% of the contractual rent). NB These pubs have been offered a 90% rent concession for July and August.
- Pubs receiving no Government grant outside Greater London rates districts were offered a 90% rent concession (paying 10% of the contractual rent).
These rent concessions applied from 20 March 2020 until the 31 August 2020.
September – October 2020:
We then announced a further package of support for rent due in September and October 2020. Despite the fact the vast majority of pubs had been trading throughout the summer, instead of removing the concessions altogether, we extended them. The methodology for tapering-off the concessions remains the same as outlined above, and we made some minor adaptations to take into account further Government support (e.g. VAT reduction, furlough bonus). A summary of the tapering off is as follows:
- Pubs who received a 50% concession (as above) were offered a 40% concession for September, and a 30% concession for October
- Pubs who received a 75% concession (as above) were offered a 55% concession for September, and a 35% concession for October
- Pubs who received a 90% concession (as above) were offered a 70% concession for September, and a 50% concession for October.
Local Lockdowns (September – October 2020):
Where our pubs were subject to local lockdowns as directed by their Local Authority between September – October, we provided further localised and individual support depending on the circumstances in that area. To reflect the alert levels announced by the Government, and the challenges to trade these created for pubs, we offered a further package of support for those pubs in the high risk and very high risk areas.
- Very high tier areas: Pubs will pay no rent – even if they have a food offer that enables them to trade. All other property charges will still be applicable.
- High tier areas. Pubs will receive a 90% rent reduction.
- Medium tier areas: Will receive our central rent concessions as outlined above.
During the second national lockdown in England in which hospitality businesses were required to close, we zeroed rent for all pubs on core leased & tenanted from 5th November until 2nd December. Pubs received the 100% concession (paying us no rent at all) regardless of whether or not they chose to operate a takeaway service.
We reverted to the previous tiered approach to rent concessions (see ‘Local Lockdowns’ above).
During the third national lockdown from January 2021, our pubs were offered a 90% rent concession with just 10% payable. In England, this will remain in place until 17 May (so pubs will only be paying us only 10% rent even if they choose to trade their outdoor areas between 12 April and 17 May). Between 17 May and 20 June, when trading restrictions are then lifted and trade is expected to resume indoors, we have offered a 10% concession with 90% payable, meaning pubs’ rent will average 50% in May. Thereafter licensees will return to paying rent in full. Similar rent concessions will also be offer to our licensees in Wales and Scotland in line with their reopening roadmaps
As we have consistently said, we continue to keep our commercial support under review. Our aim is to be fair, honest and transparent across our entire estate of 2,300 pubs. Our total investment in rent concessions will stand at £62 million between March 2020 and June 2021.
*Free of Tie and Market Rent Only Agreements: Please note that pubs operating under Free of Tie/Market Rent Only agreements are being offered a different level of support to be consistent with the wider commercial property market. For those pubs, we have deferred rent until September, with the March and June quarters to be paid in regular instalments until December 2021. The deferred rent is to be re-paid interest free and we’ve offered tenants to move to monthly payments.
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