UK pub boss blames private equity for industry woes

The founder and chairman of UK pub group, JD Wetherspoon, has warned that private equity and property investment groups have had a “pretty disastrous” effect on the British pub industry after piling large debt loads onto some companies, according to a report.

Private equity and property investment groups are helping to run down the British pub industry, according to a report in the Financial Times.

The founder and chairman of UK pub chain, JD Wetherspoon, Tim Martin, said excessive debt taken on by private equity and real estate investors was in part to blame for “running down” the industry. He warned private equity and real estate groups were having a “pretty disastrous” impact on the British pub.

Martin also hit out at the UK government’s smoking ban, which came into force in July 2007, as contributing to the problems facing the industry.

According to the report, Martin said: “A number of private equity-owned pub companies, which are actually making huge losses after [paying] interest . . . are going to have financial problems – that’s going to be the dominant headline for the next two years.”

Last month, Alchemy Partners managing partner Jon Moulton said a “good chunk” of the £20 billion ($29.6 billion; €22.2 billion) of debt in the pub industry was “unsustainable”. 

In December, lenders to the GI Partners-owned pub and restaurant chain The Orchid Group reportedly hired accountancy firm PricewaterhouseCoopers to conduct a financial restructuring on the company and to be available to step in as administrators if necessary. GI acquired Orchard, which has almost 300 locations in the UK, for £571 million (€669 million; $846 million) in 2006.  

Martin added in the FT report: “Because pubs are so loaded up with debt and regulations, not enough money has been going back into the pubs. So a lot of pubs have become run down. Landlords have been paying too much rent and are unable to provide service and prices that are attractive enough to customers.”

JD Wetherspoon has almost 700 pubs across the UK and is known for its Wetherspoon and Lloyds bar brands. According to the company’s annual report, it expects to open another 30 bars in the first half of 2009.