Pubs across the UK closed their doors in March 2020 and overnight our business came to almost a complete standstill with the vast majority of our teams now furloughed.
Overnight we had 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 are faced with difficult decisions to make in this scenario and we are no different as we look to secure the long-term financial stability of Greene King for our employees, our leased and tenanted partners and our customers.
The only part of Greene King that remains operating is our brewery in Bury St Edmunds, which continues to brew beer for our online beer shop, supermarkets and other off-licences. However, we are brewing on a greatly reduced schedule as the current demand only makes up a small proportion of our usual supply to thousands of pubs, social clubs, sports grounds and venues across the country.
For the 1,000 leased and tenanted pubs in our Greene King Pub Partners division, the current closure has thrown hundreds of small businesses into doubt and there is uncertainty over what the future holds. One of our key priorities has been to work on support we can offer to our leased and tenanted partners in these pubs at a time when we have almost no money coming into our business.
A core team at Greene King remains unfurloughed to manage day-to-day business continuity and to ensure we are all able to recover from this crisis, open our doors again and welcome our customers back into our pubs when it is safe to do so.
From the outset our chief executive set out three objectives which we are all working 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 are focused on three key areas: Our People, Our Communities and Our Leased and Tenanted Partners.
These are unprecedented times and below is an explanation of some of the work we are currently doing 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 caps the monthly furlough payments at £2,500, so we are topping-up the furlough payments for those who this would affect to ensure that every furloughed Greene King employee is receiving 80% of their pay.
Our chief executive took a 50% pay cut and the rest of our executive board took a 30% pay cut. Other senior leaders in our business have also volunteered to take pay cuts.
Savings from these salary sacrifices have contributed directly to Greene King being able to set up a Team Member Support Fund of £500,000 to support our team members who are in the greatest financial need currently. We partnered with the Licensed Trade Charity who are administering this on our behalf. There is also a GoFundMe page here where other employees can also contribute.
We have 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 are using their time while furloughed to volunteer as telephone buddies for the charity. The aim of the initiative is 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 can 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 is hosted on the GK Brewery Facebook Page, features weekly entertainment with a pub quiz every Wednesday and Rock n Roll Bingo every Friday. It is all free, with customers only asked to make a donation to our charity partner Macmillan Cancer Support if they were entertained.
We have 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 need them.
Across our pubs, our team members are now supporting their communities locally, whether by making PPE at home, looking after vulnerable customers, donating additional food and supporting the NHS.
- On 17 March we deferred rent entirely for all our leased and tenanted partners while pubs are closed. This means that while the rents are not cancelled, our partners do not need to pay us anything while their pub remains closed and cashflow is limited.
- On 25 March we confirmed we would replace for free with fresh stock all the unopened kegs and casks that will be out of date and unsaleable in our partners’ pubs when they can reopen, 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 enables 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 can offer them for the first 12 weeks of pub closures (18 March to 10 June). So far we have been able to offer approximately £4m of rent concessions and this process will continue.
- 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 will receive a 90% rent concession which runs until 4 July (the current date government has said pubs could reopen) or until they are legally able to reopen. The 90% rent concession then continues for the first four weeks of opening and then for the following four weeks there is a 50% rent concession.
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 have not sent out any invoices for rent payments unless a partner has specifically requested one.
We immediately announced that all payments are deferred and this is to allow us all to take a long-term view on how our industry as a whole can 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.
Q. Is it fair to expect pubs to carry this burden of debt when they reopen and put them under that pressure?
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.
We have discounted rents by 90% from 11 June until pubs can legally reopen and support continues during the first eight weeks of reopening.
For the earlier period of 18 March to 10 June we spoke to all our tied pub partners individually to ascertain their current financial situation. Those that were in the greatest financial need received rent concessions and we continue rolling out support to aid them in their recovery from this. 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’ government support would have run out which is why we are switching 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 and we have now gone one step further by launching our Partner Support Fund and offering rent concessions for those most in need as well as then discounting by 90% after 12 weeks of closure
Q. Why are you carrying out one-to-one conversations with pubs, why not just announce a reduction in rent for all your pubs?
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 are putting 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.
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?
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.