Business Baron

The July the regulars went outside

The smoking ban in 2007 pubs faced was not a dip in trade but a permanent change. What it did to wet-led houses, and what adapting cost.

, Britain

A corner pub in Liverpool with a tiled front and a yard at the back took its money from about forty people. They came in most nights, they stood in the same places, and a good proportion of them smoked.

On Saturday 30 June 2007 they smoked at the bar. On Sunday 1 July they did not, and from then on every cigarette meant leaving the room, which in that pub meant a yard with two barrels, a bin and no roof.

The trade had known the date for over a year. Knowing the date did not help much, because the thing that arrives is not a rule about smoking. It is a permanent change in how long people stay.

The ban arrived from the north, in stages

Scotland went first, in March 2006. Wales followed on 2 April 2007 and Northern Ireland on 30 April 2007. England was last, on 1 July 2007, under the smoke-free provisions of the Health Act 2006.

That sequence mattered, because it meant an English licensee in 2007 had a year of Scottish trading figures to look at and could see roughly what was coming. What the Scottish experience showed was that the effect was not evenly spread. Pubs with food, families and outside space were largely fine and some did better. Pubs without those things, in the places where the pub is the front room of the street, were not.

What the law asked of the person behind the bar

The duty falls on the person who controls the premises, not on the smoker alone. Smoke-free premises must display the required signage, and the licensee is expected to prevent smoking rather than merely to disapprove of it. Enforcement is by the local authority, with fixed penalties available.

The definition that shaped the next two years of capital spending in the trade was "enclosed or substantially enclosed". A structure with a roof is substantially enclosed if less than half of its walls are open, which is the origin of every three-sided shelter erected in a pub yard between 2007 and 2009. It is also why so many of them were miserable: the more comfortable you make a smoking shelter, the closer it gets to being a room, and a room is not allowed.

Two other permissions sit behind the shelter. A permanent structure usually needs planning permission, and the premises licence brings in the local authority and the neighbours. A licensing authority can attach conditions to an outside area, including how late it may be used, and it can require that non-smoking seating is genuinely provided rather than left as whatever is furthest from the door.

Wet-led and food-led went in opposite directions on the same day

The trade divides takings into wet, meaning drinks, and dry, meaning food, and 1 July 2007 pushed the two apart.

Food-led houses gained. The customers who had stayed away from a smoky dining room came back, and families came with them. Wet-led houses lost, and the mechanism was about time rather than principle. A drinker who leaves the room every twenty minutes has a shorter evening. Rounds break up. Conversations end earlier. The fourth pint, which was the profitable one, does not get ordered. Machine income falls too, because the person who fed a machine while chatting at the bar is now outside.

None of that was reversible by better service, and it did not recover. It sat on top of pressures the trade already had: supermarket prices for take-home drink, tighter attitudes to driving after a drink, and a long decline in beer volumes that had been running for years.

A yard is a cost, and a kitchen is a different business

The choice facing a wet-led pub with no garden came down to spending money in one of two directions.

Covering the yard properly meant a compliant shelter, a level surface, lighting, heating that runs on the coldest nights when it is most needed, and a conversation with whoever lives behind the wall about twenty people talking outside at half past eleven. The return on it is defensive. It slows the loss of the customers you already had and does not bring in anybody new.

Putting in a kitchen is the other direction, and it is a different trade rather than an addition to the old one. It means extraction and ducting, which brings planning back into it, a grease management regime, food hygiene registration and inspection, a chef whose wage does not vary with covers, and a break-even point that is suddenly much higher than it was. A wet-led pub on a quiet Tuesday costs you one member of staff. A food-led pub on a quiet Tuesday costs you a kitchen.

It also takes time. Building work closes part of a small pub for weeks, and the trade you lose while it happens comes out of the same cash the work is being paid for.

The timing was worse than the rule

The pubs that decided to borrow and build did so in the second half of 2007, which turned out to be the worst possible moment to take on debt.

Queues formed outside a bank in September 2007. Credit tightened through 2008, the recession followed, and the beer duty escalator introduced in the 2008 Budget put duty up by more than inflation every year until it was scrapped in 2013. Pub closures, which had been running at an uncomfortable rate before the ban, accelerated sharply in 2008 and 2009.

So the honest account of that period is not that one law closed a lot of pubs. It is that the ban removed a slice of wet trade permanently, the houses that could adapt needed capital to do it, and the capital market shut about ten weeks after the rule came in. The pubs that came through were usually the ones that made the decision quickly and cheaply, before borrowing got hard, and the ones that waited to see whether the regulars would come back waited themselves into a recession.

Where this shows up in the game

One July is a historical start, and it is pitched at medium difficulty rather than hard, which reflects the fact that there is a way through it and you can see what it is from day one. You take a sole trader pub in Liverpool in July 2007, the month indoor smoking stops, and you have eighteen months.

The scoring is trailing twelve month sales against a target of £340,000. Wet trade falls by a step on 1 July and does not recover, so the target cannot be reached by the pub you currently run. Investing in a covered outside area or in a kitchen opens a different line of demand, at a cost and with a delay before it earns anything. The credit crunch then arrives in the second half of the run, on the real dates, which is what makes the decision about when to borrow a real decision rather than an obvious one. The One July page sets out the rules and what counts as failure, which is either closing or ending the eighteen months short.

The seed is fixed at 600013, so everybody who attempts it gets the same Liverpool, the same summer and the same customers walking out to the yard, and the results can be compared like for like. It runs under ironman rules: one save, and what happens happens.

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