Martin: private equity ruining pubs
Private equity groups are "running down" the pub industry through "stupidity" and "greed" — that is the astonishing attack launched by JD Wetherspoon supremo Tim Martin on the market.
Martin, speaking to the Financial Times, said that equity groups and property investors had had a disastrous effect on the industry.
"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," he said.
He pointed to Laurel Pub Company and Orchid as prime examples.
He said: "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."
It is not the first time Martin has hit out at private equity and venture capitalists. Last year he claimed private equity groups were keeping unviable pubs open.
He said: "Efforts are focused on boosting short term profits by heavy incentives for senior management combined with considerable capital expenditure on the pubs.
"The boost to profits is typically not sustainable, producing predictable results for future acquirers.
"In addition, excessive numbers of pubs were recently built in some large town city centres, usually on a leasehold basis.
"Many of these pubs are probably now unprofitable and will have to be converted to other uses over time.
"The combination of equity and bank finance is potentially keeping unviable pubs open and so creates instability in the general UK pub market."
