Pubs across the UK closed their doors for more than 100 days in 2020, from 20 March until 4 July and overnight our business came to almost a complete standstill with the vast majority of our teams furloughed.
We reopened 1,294 of our 1,700 managed pubs on Monday 6 July, with a further 250 pubs following on 27 July, as we gradually reopened pubs in a manner that was safe for customers while simultaneously being financially viable.
The 15 weeks of closure saw almost no cash coming into our business. We employ 38,000 people, with the vast majority working in the 1,700 pubs that we run ourselves. All businesses no matter their size were faced with difficult decisions to make in this scenario and we were no different as we looked to secure the long-term financial stability of Greene King for our employees, our leased and tenanted partners and our customers.
Initially, the only part of Greene King that remained operating was our brewery in Bury St Edmunds, which continued to brew beer for our online beer shop, supermarkets and other off-licences. However, we were brewing on a greatly reduced schedule as the demand only made up a small proportion of our usual supply to thousands of pubs, social clubs, sports grounds and venues across the country.
On 22 May, we were able to start offering takeaway from 29 London pubs which as well as helping support local communities and our teams also helped us plan the wider reopening and recovery of our pubs. This takeaway and delivery offer was further extended on 10 June to 40 pubs, mainly in the East Midlands, East Anglia and North West of the UK.
On 6 July we reopened nearly 1,300 pubs, almost all of which now had the capacity for takeaway and an order and pay app running. Ahead of reopening we launched PubSafe for our managed pubs – an industry leading commitment to customer safety that has been well received by customers returning to pubs. We have continued reopening managed pubs throughout July and August.
For the 1,000 leased and tenanted pubs in our Greene King Pub Partners division, the closure threw hundreds of small businesses into doubt amid uncertainty over what the future held. One of our key priorities was to work on how we could offer financial support to our leased and tenanted partners in these pubs at a time when we had almost no money coming into our business. Ultimately during the lockdown we were able to commit around £15m to put our tenants in the best position we could to recover their businesses. This was done through a mix of rent concessions, replacement of cellar stock and offers on new stock, investment in Personal Protective Equipment (PPE) and training and support for their reopening. This support has continued post-lockdown and now stands at £21m.
A core team at Greene King remained unfurloughed throughout the crisis to manage day-to-day business continuity and to ensure the business was able to recover from this crisis, open pub doors again and welcome our customers back when it was safe to do so.
From the outset our chief executive set out three objectives that we all worked towards:
- Ensuring the financial stability of our business
- Positioning us to exit this crisis as the strongest in the sector and be ready to bounce-back
- And as far as possible protecting our employees and leased and tenanted partners from the worst impact of the crisis.
Our efforts were focused on three key areas: Our People, Our Communities and Our Leased and Tenanted Partners.
These were, and remain, unprecedented times and below is an explanation of some of the work we carried out to protect pubs and communities around the UK.
After pubs closed on 20 March we were able to guarantee to all 38,000 employees that we would continue to pay them on full salary until 5 April.
From 6 April, we were able to furlough 99% of our employees via the government’s Job Retention Scheme on 80% of pay. The government capped the monthly furlough payments at £2,500, so we topped-up the furlough payments for those who this would affect to ensure that every furloughed Greene King employee was receiving 80% of their pay while furloughed.
Our chief executive took a 50% pay cut for the duration of pub closures while the rest of our executive board took a 30% pay cut for the same period. Other senior leaders in our business also volunteered to take temporary pay cuts.
Savings from these salary sacrifices contributed directly to Greene King being able to set up a Team Member Support Fund of £500,000 to support our team members who were in the greatest financial need. We partnered with the Licensed Trade Charity who administered this on our behalf. There is also a GoFundMe page where other employees could also contribute.
On 12 June we launched Pub Safe – a new set of five promises to our team and customers to make sure when our pubs reopened it was in as safe a manner as possible.
After pubs closed, we donated more than £250,000 of food to Fareshare, the Felix Project, Bread & Butter charity and Emmaus, as well as local foodbanks and the NHS.
Working with our charity partner Macmillan Cancer Support, a number of our team members used their time while furloughed to volunteer as telephone buddies for the charity. The aim of the initiative was to alleviate loneliness and social isolation during the Covid-19 pandemic, with our team members receiving training from the charity before being matched to one or two people living with cancer so they could speak to them once a week and help deliver 12 weeks of emotional support.
Prior to pubs being closed we had been able to purchase a significant amount of hand sanitiser to distribute to all our pubs for team members and customers to use. However, with the closure of pubs we wanted this to be put to immediate use and so donated 3,000 litres to the Leonard Cheshire disability charity.
We launched our virtual pub, The Lock Inn, to help fight loneliness, encourage interaction and provide some entertainment during the lockdown. The pub, which was hosted on the GK Brewery Facebook Page, featured weekly entertainment with a pub quiz every Wednesday and Rock n Roll Bingo every Friday. It was all free, with customers only asked to make a donation to our charity partner Macmillan Cancer Support if they were entertained.
We made accommodation rooms available in our home towns of Bury St Edmunds and Burton-upon-Trent for key workers such as local NHS and care home staff to use when they needed them.
Across our pubs, our team members supported their communities locally, whether by making PPE at home, looking after vulnerable customers, donating additional food or supporting the NHS.
As part of our longstanding relationship with the Prince’s Trust, we donated £20,000 to its Young Persons’ Relief Fund to support young people facing uncertainty in work and careers right now.
- On 17 March we deferred rent entirely for all our leased and tenanted partners while pubs were closed. This meant that while the rents were not cancelled, our partners did not need to pay us anything while their pub remained closed and cashflow was limited.
- On 25 March we confirmed we would replace for free with fresh stock all the unopened kegs and casks that would be out of date and unsaleable in our partners’ pubs when they reopened, at a total cost of approximately £1.3m + VAT.
- On 1 April we teamed up with StarStock to support their My Pub Shop initiative – a not-for-profit click & collect platform which enabled pubs, local shops and stores to sell essential food and drink to their local community. We promoted this to all our leased and tenanted partners as an option for those who wanted to support their communities by opening their pubs as a community shop during the closure period.
- On 17 April we launched a Partner Support Fund, which saw us unfurlough our Business Development Managers to carry out one-to-one discussions with every single one of our tied partners to establish what rent concessions we could offer them for the first 12 weeks of pub closures (18 March to 10 June). We were able to offer approximately £4m of rent concessions across this first 12-week closure period.
- On 27 April we confirmed that we would pay for every single one of our tied pubs to be members of the BII (British Institute of Innkeeping), an independent body that provides expert advice on everything from legal and licensing issues to tax queries. Membership usually costs £155 per pub per year. This covers the next two years and will be reviewed on an annual basis.
- On 11 May following confirmation from the Prime Minister that pubs would not be opening before 4 July at the earliest, we told our partners that we would provide additional ongoing financial support to aid recovery and reopening plans.
- On 21 May we announced the next wave of financial support for our tied partners. From 11 June onwards all our tied pub partners received a 90% rent concession which ran until 4 July in England, 15 July in Scotland and 3 August in Wales, or until they were legally able to reopen. The 90% rent concession continues for the first four weeks of opening and then for the following four weeks there is a 50% rent concession. We estimate the total value of rent concessions we offered partners so far across the Covid-19 period will equate to around £11m.
- In addition to the financial support on rent our tied partners also benefited from product discounts on all kegs and casks purchased through Greene King for the first eight weeks after reopening.
- On 5 June we wrote to all our partners to commit to them that we would pay for every pub to receive £250 of PPE support, as well as £120 of Covid-19 signage, alongside offering them free training courses, business support planning and more as we all move closer towards reopening. This brought the total financial support from Greene King Pub Partners to tenants to around £15m.
- In the run-up to reopening from 4 July we kept our partners constantly updated on the latest government advice on operating pubs that met all the necessary Covid-19 criteria and also created a dedicated ‘Reopening Hub’ on our tenant intranet full of assets and resources to support their reopening.
- On 21 August we wrote to all our tied partners to introduce an additional £6m of financial support that brought our total financial support to tenants to around £21m. We confirmed that a 40% rent concession would be in place for all tied pubs for a further four weeks after the previous round of support came to an end, then a 30% rent concession would continue for the four weeks after that, taking support through until October.
- At the same time we also announced trade support for tied tenants buying barrels of beer or cider from Greene King would also continue through to 2021, with tied tenants receiving a trade credit of £35 per barrel.
- On 7 October, as restrictions on pubs were tightened, including a 10pm curfew and households not allowed to mix in some parts of the UK, we announced that all tied pub tenants would receive a minimum 40% rent concession through to Christmas, with pubs that had to close under local lockdown regulations receiving a 90% rent concession, which would be reviewed after four weeks. This brought our total financial support for tenants to date to £25m.
Early on during the lockdown, when the long-term picture was extremely uncertain, there was a lot of misinformation about pub companies demanding immediate rent payments from tenants, which was not the case at Greene King.
We were quick to make clear that all rent payments were fully deferred while pubs remained closed. However, while we were formulating our long-term support plans for rent concessions, there was understandable uncertainty from tenants about what the future held. This was also complicated by differing levels of government grants available to different pubs, depending on their size and rateable value, which made it impractical for us to offer a uniform support package for the early weeks of closure.
The following Q&A was written at the time to help explain the situation and we hope it continues to be helpful to demonstrate our thinking during the lockdown.
Q. How can you expect rents from pubs when they are closed?
We are not asking for any rent payments from pubs while they are closed and did not send out any invoices for rent payments for the first few months’ closure unless a partner specifically requested one.
We immediately announced that all payments were deferred and this was to allow us all to take a long-term view on how our industry as a whole could recover from the devastating blow of pub closures.
We initially spoke directly with partners about where we could provide further financial relief for the initial 12-week closure period. From 11 June onwards rent is discounted by 90%, which also continues for the first four weeks of reopening.
We will not be expecting all outstanding rent to be paid back immediately when pubs reopen, and we will work collaboratively with all our tenants to agree sustainable payment plans that reflect the current situation.
Q. Is it fair to expect pubs to carry this burden of debt when they reopen and put them under that pressure?
We have taken a number of steps to reduce the amount of rent our pubs would pay, with all tenants receiving 90% rent concessions from 11 June until four weeks after reopening, with a further reduction after that, and £4m of rent concessions covering the first 12 weeks’ closure for those pubs that were in need of immediate financial support. We are extremely mindful of the pressure that our leased and tenanted partners are under and are offering them as much support as we possibly can, both in terms of financial support as well as business guidance and advice, for example by paying £250,000 so that every single tenanted pub receives PPE support to assist with reopening.
We will continue working with each of our partners to manage their situation appropriately and in a way that is mutually beneficial for everyone.
Our model of working is based on partnership and means both parties must recognise the need for forbearance and understanding of each other’s circumstances.
Q. Why are you not offering as much of a rent concession to pubs that have received grants from the government?
We have sought to follow government guidance on this and have been led in our decision-making by the Chancellor of the Exchequer, who on multiple occasions has stated that business support grants issued to small businesses such as pubs are there to help them continue to meet their biggest fixed costs – and he has specifically quoted rent as being one of those in the House of Commons. You can watch his comments by clicking here and watching from 32 minutes onwards.
However, we are not asking any of this is to be paid to us while pubs are closed.
The purpose of the grants is to keep cash flowing through the UK economy. It allows rent payments and other fixed costs to be met which in turn allows landlords to continue making payments to suppliers and allows the economy as a whole to benefit.
The grants covered the first 12 weeks of closure, which is why our support was on a pub-by-pub basis at that stage. After 12 weeks, we believe in most cases government support would have run out which is why we switched to a 90% rent credit for all tied pubs from that point onwards.
Q. Why have other pub companies been able to cancel rent entirely but not Greene King?
The pub companies that have fully cancelled rent for the duration of pub closures all have fewer than 500 pubs – less than half the number Greene King has – and everyone’s financial situation and business mix is different.
By deferring payments while pubs are closed we removed any immediate cashflow problems for our partners, followed up by offering rent concessions for those most in need through our Partner Support Fund plus discounting rents by 90% after 12 weeks of closure for all tied pubs.
Q.Why were you initially carrying out one-to-one conversations with pubs, why not just announce a reduction in rent for all your pubs as you did from 11 June?
The support to pubs from government has not been equal. Pubs in England with a rateable value below £51,000 have been able to receive a business support grant up to £25,000 to assist with fixed costs such as rent, while those with a rateable value above £51,000 received nothing.
We put in place rent concessions on a pub-by-pub basis for the initial 12-week closure period, which we believe are fair and sustainable, based on the differing levels of government support announced – with our partners who have had no support from government so far getting higher rent concessions from us. During this phase of support we gave £4m in rent concessions.
This meant we needed to have one-to-one discussions initially as there is not a one-size-fits-all solution currently.
For the period after the 12-week closure, all tied pubs get a 90% rent discount.
Q. My local pub operator says they may not reopen because Greene King is demanding full rent from them. What is your response to that?
We are not demanding full rent from any of our tied pubs, with even tied pubs that received £25,000 from the government still getting a minimum 90% rent discount for at least six weeks from us and a further reduction of 50% for the following four weeks. Every individual pub’s situation is different but seeing any pub close is the last thing we want to see.
Not only is it devastating for that individual and community but it damages Greene King as well and we will do everything we can to avoid this happening.
If that pub is closed then a new tenant needs finding, which could take several months and during which time Greene King receives no income from that pub.
Sadly, a pub may unavoidably close because of the current Covid-19 crisis if it has significant other debts that a tenant has been unable to meet, such as paying suppliers or utility companies, but it will not be exclusively because Greene King is demanding rent.
We will take into account the full financial circumstances of each of our pubs when offering rent concessions and discussing payment plans.