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As strike week looms, Punch Pubs boss issues a plea to rail unions

Clive Chesser, chief executive of Punch Pubs, could be forgiven for needing a stiff drink. He has guided his group’s 1,300 pubs through the dark days of Covid lockdowns and, more recently soaring inflation, energy bills and staff shortages. 

But he now faces another even more immediate problem. ‘The timing of this is awful,’ he says, imagining the impact four days of rail strikes planned from December 13 will have on his industry. 

The looming crisis even seems to have taken the fizz out of the previous night’s World Cup merrymaking as England beat Wales. 

Glass half full: Clive Chesser says it is crucial the hospitality sector has a good Christmas trading period

‘It is crucial the hospitality sector has a good Christmas trading period,’ he says standing in one of Punch’s London pubs, The Prince of Wales Townhouse in Hammersmith. 

‘What we are trying to stress to the Government and the RMT is that, unless they reach a resolution early, the damage for hospitality is done.’ 

The clash with the transport workers’ union looks all but set to dash hopes that this year – finally – would be a ‘proper’ Christmas after Covid restrictions scuppered two festive seasons in a row. 

Festive parties at his group’s urban pubs are already being cancelled that week as would-be revellers cut their losses to avoid the travel chaos, he says. ‘We respect the union’s ambition to protect their workers’ rights, and for better pay,’ Chesser says. ‘But while they are doing that they are hugely damaging the employment prospects, and the earnings and tips, of the three million people who work in hospitality.’ 

Punch Pubs, led by Chesser since 2018, runs a mixed bag of independent community pubs across Britain, ranging from cheap and cheerful value pubs to gastropubs with boutique hotel rooms.

It owns more than 90 per cent of the freeholds of its properties, run by a network of independent publicans under various leasehold and profit-share management models. 

During Covid, the private business caught the eye of dealmakers at New York investment giant Fortress. The investment giant, which had already contributed to Punch’s £600million debt refinancing, opened the bidding for its protracted battle to buy supermarket chain Morrisons around the same time.

Soon after, so the story goes, the US bankers sampled Punch Pub hospitality during a pub crawl in the Cotswolds. By last December, Fortress had bought the entire group in a confidential deal thought to be worth £1billion. 

Chesser says Fortress supports his plan to invest and to buy more pubs – just as he did last summer, snapping up 56 sites from rival Young’s.’ We have an eye on M&A [mergers and acquisitions],’ he says. ‘Although we’re in a vulnerable sector, Fortress has acquired us for a reason, which is that they’ve got real confidence in our growth trajectory.’ 

Friends call 53-year-old Chesser a cautious chief executive and, while inflation eats into his customers’ disposable incomes, he says any investment spend will be ‘considered and circumspect’. 

Punch’s property assets are worth £895million, according to a Savills valuation, but they are loaded up with almost 70 per cent of debt. 

‘Pubs are an affordable treat and will continue to do well. But the pressures on consumer spending are very real,’ Chesser says. ‘Then there are some big macro factors, such as beer duty, where we’re looking for the Government to give us some clarity and support.’ 

Last Thursday, Chesser had breakfast with Shadow Business Minister Jonathan Reynolds to discuss Labour’s plans for reforming business rates, calling current measures a ‘sticking plaster’. 

But he has been lobbying the Tories too, to persuade them to lift the huge tax burden on pubs. 

His wish-list also includes a new visa system to help with labour shortages and further help with energy bills once the relief scheme ends in March. Energy prices at his pubs have doubled or, in some cases, tripled since September. 

Prices had become ‘unsustainable and untenable’, Chesser says. ‘The Government was absolutely right to step in. But it is too short term.’ 

Add in wage inflation for the roughly 15,000 people employed at the pubs in his group, and ‘every line’ of his pubs’ profit and loss accounts are being squeezed, he says. In normal times, he would pass on the costs to his customers by raising prices. But the cost of a pint at his pubs has already risen by 20 per cent over the past year to an average of £3.80 – compared to around £4 nationally. In rivals’ Central London chain pubs, a pint of lager can cost up to £7. 

The long-term trend for pubs, he says, is that people will go out less frequently but – on the bright side – will buy premium food and beer as pub trips become more of an occasion. Led by Punch Pubs’ sister business, a craft beer and pub business called The Laine Pub Company, he plans to tempt people off their sofas – and win over a generation of younger drinkers – through providing more events and entertainment. 

His favourite Laine pub is the Four Thieves in Clapham, which calls itself ‘the ultimate pub experience’ with everything from comedy nights to virtual gaming. 

‘Downstairs there are karaoke booths; upstairs there’s virtual reality pods like grown-up Scalextric and retro arcade games on big screens,’ Chesser says. ‘It’s a really future-looking pub business.’ 

Customers looking to use his pubs as offices, and cut their home energy bills, are welcomed – the new trend known as ‘Working from Pub’. 

He says: ‘We can provide a great environment where we pay the energy bill and we have good coffee and wi-fi in a comfortable environment. We want the communities to feel like stakeholders in their local pub.’ The most recent financial update for Punch Pubs showed it made pre-tax profits of £20.7 million over the year to August 14, on £284million of revenue. 

Chesser says: ‘We’re trading ahead of 2019, but profit is more challenging because of the cost impacts.’ Yet the ‘bond of trust’ with his publicans has never been stronger, and around 50 Punch pubs each year are switching to the management partnerships model. Under this agreement, Punch pays the running costs for the pub and the operators hire the staff and pay their wages out of an agreed share of overall profits. 

‘Our ambition is to be a modern and progressive public company, supporting innovative entrepreneurs,’ Chesser says. ‘I take my hat off to our publicans every day, because they’ve set up their own business. 

‘They’re brave enough to do that, and they throw their heart and soul into running a business.’ 

Pub purists might say Generation Xers plugged into virtual headsets and office workers tapping away on laptops have no place in a traditional community boozer. 

Unless they evolve, however, hundreds of British pubs could one day have to call time permanently.


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