While this is a moment when it may feel like the world temporarily pauses to assess the impact of the Middle East conflict, in more general terms, investor interest has been shifting back toward real world, operational businesses. This is a positive sign for the sector, with last year’s investment focus on technology and healthcare services easing. Capital is now moving toward consumer industries like hospitality and leisure, the “in real life trades”, which are viewed as more resilient to artificial intelligence (AI)-driven disruption. 

Lending institutions too are also showing stronger support across restaurants, quick service restaurants, pubs, bars and competitive socialising, with funding coming from high street banks, challenger banks and private credit funds across a combination of bilateral and club deals. Much of this capital is aimed at supporting growth and rollout plans, which should underpin future deal activity. This was graphically illustrated with Butcombe Group last week unveiling a refinancing supported by Barclays, Lloyds and NatWest. 

The conflict in Iran is expected to bring higher energy costs and has reduced expectations of any near-term interest rate cuts. Renewed inflationary pressure is a concern, as are potential supply chain disruptions – who knew that 30% of the world’s fertiliser passed through the Strait of Hormuz – and the effect of all this on consumer confidence. It is still too early to quantify the full impact, but these issues remain front of mind for operators, lenders and investors. This latest situation follows several years of volatility, and the possibility of further cost increases means businesses are preparing for a more cautious trading environment.

There are, however, several counterbalancing factors. The government’s spring statement introduced minimal change, which the market has welcomed. As above, investor sentiment has to a degree shifted toward tangible, people focused businesses that serve the real-life economy. Concerns about AI disruption in other sectors are reinforcing the appeal of hospitality and leisure, where human interaction and experience is central (and difficult to replace with AI). Major upcoming sporting events, including the World Cup, should provide a boost – particularly for pubs, but also for restaurants due to later match times. 

The Middle East conflict may also prompt increased inbound tourism and a rise in staycations, supporting summer trading, as well as a potential influx of capital from investors from that region to the UK, as a comparatively safer haven (the notable recent example being Abu Dhabi-based Diafa’s acquisition of Richard Caring’s restaurant business). These dynamics collectively create a more favourable backdrop than headline geopolitical risks may suggest.

Operators remain aware that staying at home is a strong competitor. The at home dining experience continues to improve, supported by delivery platforms, meal kits and rapid grocery services. As a result, the best operators are focused on delivering service and value that exceed that benchmark and cannot be replicated at home. While over cutting labour in a way that risks the guest experience and deters repeat visits, or under investing in training or service design remain the very real enemy to brand equity, businesses continue to seek accretive efficiencies – including exploring practical AI-use cases that deliver genuine operational benefit. The challenge is distinguishing between tools that create measurable value and those that simply add complexity.

An increasingly disciplined approach to site portfolios is essential. Site economics continue to shift, and smaller units are becoming harder to justify. Operators are applying greater scrutiny to rollout plans and upcoming lease renewals to determine that locations continue to be viable and attractive. They are understandably thinking long and hard before committing to new leases, including assessing the potential downside scenario in the event of any further external economic shocks. Footfall patterns have changed, hybrid working has altered weekday demand, and some secondary locations no longer support the economics they once did. Businesses that actively manage their estates rather than allowing leases to drift will be better positioned to protect margins.

There are dynamics in play that mean we can anticipate a more active deal environment than the broader macro narrative might imply. High growth concepts with strong returns on capital will continue to attract buyers, regardless of market conditions, and opportunistic trade buyers are active, seeking to acquire brands that complement their portfolios. Young’s recent acquisition of Cubitt House is a case in point, and an example of a trade buyer backing a high-quality leasehold operator. Some long held, high quality businesses are now coming to market as shareholders accept valuations below previous peaks but still sufficient to deliver acceptable returns. Private equity firms with long-held assets may also transact at lower prices to return capital to investors or redeploy funds. 

We also understand that a number of company refinancing deadlines will come up this year. While liquidity in the debt market should allow many businesses to refinance, some may be unable to do so, prompting investors to plug the gap with equity or sell the business (potentially as part of a broader restructuring). Current pressures suggest restructuring activity will continue to rise, particularly among operators with weak balance sheets or underperforming estates.

Overall, while the medium and long-term impact of the conflict in the Middle East remains uncertain and may delay decision making in the short term, the renewed investor focus on real life, experience-led businesses is a constructive trend for the industry, for the year ahead. The sector has demonstrated resilience through multiple shocks, and the combination of investor appetite, lender support and consumer demand for experiences provides a solid foundation for future investment activity.

In our current climate, much of the narrative surrounding our sector is more about survival than growth. However understandable that is – and let’s face it, the events of the past week haven’t helped, with inflation up, fuel shortages and energy price spikes – it is also on all of us to highlight and celebrate the positive news and the potential of our industry to “do well, by doing good” – one of our core values at Punch Pubs.

 

It is something that we at Punch aimed to do last week with the launch of our report: “The Public’s House, the True Economic & Social Value of Pubs”. For anyone that missed it, this was an independent academic report, authored by the professors at Northumbria University, Newcastle. It’s a vital project for the sector, and one that I have lived and breathed for more than 12 months now. From some awe-inspiring conversations with publicans and listening to humbling tales from guests to getting to grips with various formulas and mind-bending academic theory – it will absolutely go down as one of the most important pieces of work in my career.

 

For myself and the academics involved – the wonderful and knowledgeable Professor Ignazio Cabras and Dr Matthew Shannon – the ambition of the report was clear: to quantify, for the first time, the true economic and social value of a pub.

 

And we managed just that. We were able to show that the average pub contributes up to £1.3m in economic and social value to its local community each year and that, when taken as a whole, the entire pub sector contributes at least £142m in social value per annum. It is worth noting that over and above the activities we could attribute a financial value to, many more cannot be monetised. From providing safe spaces for the vulnerable, company for the lonely, giving advice and support to those in need and providing a welcoming and safe space for all – such benefits in kind are, quite simply, priceless. As a result, as impressive as they are, the figures in the report are very much at the conservative end of estimations. 

 

In addition, there is another very significant finding contained in the report that I’d like to take the opportunity here to highlight. That being a socially valuable pub isn’t just good for the soul; it’s good for business too. 

 

Without wanting to get into the weeds of it – and for those that do, the full academic report is here – this finding is based on something called the Community Engagement Index (CEI). This is a model developed by Northumbria University while developing the report. 

 

The CEI is based on a scientific formula that scores each pub community activity (for example, hosting community events, local sponsorship, charity and fundraising) and combines the results into a single index or score. Higher scores indicate deeper and more sustained community engagement. Through this model, we can see pubs with lower CEI scores display average predicted sales of around £550,000 per year, while those with higher CEI scores are associated with predicted sales approaching £700,000 – a 27% increase. 

 

This suggests an average pub could raise its annual revenue by as much as £150,000 a year by driving social value and community engagement. This is a not an insignificant amount of cash in the till, particularly under current pressures, and it could just be the key to unlocking growth for pubs. 

 

To be clear, this doesn’t have to come from significant changes to a business model or a huge investment in new facilities. It comes from small acts, often and regularly. The CEI estimates that a pub supports each year, on average, three or more charity/community initiatives – the equivalent of £1,000 in space-in-kind, more than £500 in local advertising support, £850 in goods and/or sponsorship, and between 45 and 75 hours of volunteer work locally.

 

Publicans looking to drive growth and do more for their communities could do well to benchmark their own activities against these metrics. For more inspiration, operators can dive further into the research and find real-life examples. There’s the publican that gives over his pub car park to parents of the local school to help with drop off and pick up; the one that runs an LGBTQ+ running club; the one that runs community cooking classes.

 

There are the knitting circles, the bereavement groups, the dementia support meetings, the drag nights, the new mum mornings and the myriad small acts of kindness and community spirit that welcomes people in and offers them comfort and support day-in, day out. 

 

This evidence, contained in the report, underscores the important role that pubs play in inspiring those moments, fostering social cohesion, combating loneliness, strengthening local networks and sustaining the cultural fabric of the places they serve. It is also, for the first time, able to prove that this is good for the bottom line. 

 

This is something we should not just shout about but capitalise on, to drive growth and underline the potential of the pub sector. This report should act as a call to action, not just for consumers to come out and make the most of these valuable community assets, but for all of us in the sector to show how we can “do well, by doing good”.

 

When perched at the pewter-topped bar of The Grenadier pub in London’s Belgravia during a recent late-afternoon, all was peaceful until an American couple burst through the door, all mouths blaring. They had recently bought a Grenadier – “the car, not a soldier” they very quickly clarified – and wanted photos of themselves in the namesake bar. They were also keen on taking away some merchandise, but sadly the bar had no t-shirts nor caps, so they left empty-handed.

 

It wasn’t long before various other American families filed into the compact bar for their early dinner bookings. The picturesque pub has long been a favoured attraction to visiting Americans – whether they be working for US investment banks or tourists – and this fandom for British pubs seems to have ratcheted-up over recent years.

 

Ahead of my Grenadier visit, I’d enjoyed a coffee with Dominic Jacobs, founder of Ardent Pub Group, at his busy The Cadogan Arms in the King’s Road, where we had, coincidentally, been discussed the phenomenon of the Great British pub increasingly appealing to Americans.

 

“Our pubs have never been hotter in the US,” he suggested – fully aware of the serious social media following that his two Central London pubs have in America. He closely monitors its followers and where they are based, and it is known that The Cadogan Arms and The George in Fitzrovia have strong appeal, particularly among New Yorkers, and that this is helping drive strong custom into his Central London venues. 

 

London is – were it ever not – its own bubble, but there is no disputing the fact that despite the incredible challenges in the sector, there have been some strong performances in the capital. Ardent Group is 50% up on its business case that was put to its new investors recently, and Jacobs says it is enjoying 30% year-on-year growth (across its three sites, with The Hound in Chiswick making up the triumvirate). This has given him the confidence to plan for up to seven more pubs, and he reveals three are close to being signed off. 

 

Jacobs believes social media followings suggest certain pubs have effectively become brands. Okay, I know this is very unscientific – and was generated off the top of our heads – but we both reckoned the likes of The Devonshire, The Harp, The Churchill Arms (particularly at Christmas), The Audley, The Guinea and The Lamb & Flag qualify as strong brands that are proving a big draw to visitors from the US, and also elsewhere.

 

Every US citizen would acknowledge that their bars and restaurants are apt to fully leverage merchandise, and there is no way a pub like The Grenadier would fail to have t-shirts and caps available for the visiting couple. But we are learning here in the UK. Hats off to The Black Dog in Vauxhall for its sterling work after it was referenced in a song on Taylor Swift's album “The Tortured Poet's Department”.

 

The pub became mobbed with fans, who inundated staff with requests to buy its branded pint glasses as memorabilia. Sensibly, the pub launched an online store, selling The Black Dog branded items including oversized and cropped hoodies, t-shirts, jumpers, baseball caps, tote bags, pint glasses and travel mugs, starting at £20.

 

Fuller’s has also leaned into the links The Prince’s Head pub in Richmond has with Ted Lasso by offering a range of related goods, and The Cabbage Patch in Twickenham has a range of rugby-related items. There is also merchandise available at the Lamb & Flag and The Admiralty, among other pubs in its estate that have rich histories.

 

Not every pub will be fortunate enough to find itself on the map of visitors and tourists from the US and elsewhere, but every venue is arguably a brand in some form of other – with unique/distinct characteristics – and from this, value can be gleaned.

 

This could include potentially leveraging merchandise, whether that is clothing, glassware, sauces or other unique memorabilia. Consider that the couple in The Grenadier left without buying a drink as they had only visited the pub for its non-existent merchandise. Missed opportunities indeed.

In this decade alone, the hospitality sector, and arguably the wider economy, has been hit by three major energy price shocks.

 

First came covid, which sent demand patterns into chaos. Then the energy crisis, driven by Russia’s invasion of Ukraine, which reset the market entirely. Now, the latest conflict in the Middle East is doing what these situations tend to do: injecting yet more uncertainty into already volatile markets.

 

This one feels slightly different though. Right now, price movement is being driven as much by political rhetoric as physical supply. Comments from the White House, rising tension with Iran and the ongoing question marks around production in the Gulf and shipping through the Strait of Hormuz are all feeding into market sentiment.

 

For the moment, most of that impact is sitting in the near term. Contracts further out, into 2027 and beyond, have not fully priced in a prolonged disruption. But that may not last. As of mid-April, there is a growing sense that this could drag on. 

 

If it does and we head towards winter with tighter liquified natural gas and oil supply, the pressure will build quickly. That brings us to the uncomfortable reality. Volatility is no longer a phase; it is the market. The question for hospitality operators is simple – are you set up for that, or still reacting to it?

 

There is still an outdated common view that energy contracts only really matter when you are close to renewal. Even on fixed contracts, there are often opportunities to act well in advance if you are watching the market. Months ahead, sometimes longer.

 

You do not need to become an energy expert, but you do need a basic sense check. If you signed at £60 per megawatt hour and the market is now at £120, you don’t need a consultant to tell you what is coming next.

 

That level of visibility is not hard to get. Regular market updates, including those from firms like True Group, exist for exactly that reason. The bigger issue is action, not lack of insight.

 

The operators who handle volatility best tend to have already answered the key questions. What is our threshold? When do we move? Who signs it off? Without that, even good information arrives too late to be useful.

 

For larger groups, flexible procurement is increasingly the way forward. Spreading buying decisions over a number of years takes the pressure off trying to ‘get it right’ in one moment. It is less about timing the market perfectly and more about not being exposed to it in the first place.

 

Price gets all the attention. Consumption should get just as much. Most businesses are still wasting somewhere between 10% and 30% of the energy they buy. That is not a rounding error, it’s margin, and it is largely within your control.

 

Half-hourly data is the starting point. It shows you exactly when energy is being used, and more importantly, when it should not be. What tends to come out of that is not especially surprising, but it is expensive.

 

Sites running hard when they are closed. Equipment left on overnight. Heating and cooling systems working against each other. Most of it just goes unnoticed.

 

A relatively small investment in monitoring usually pays for itself quickly because it makes those issues visible. Fix them and the impact is immediate. Lower consumption, lower cost and less exposure when prices spike. Simple, but often overlooked.

 

When markets jump, the instinct is to move quickly and lock something in. Understandable, but not always smart. In uncertain conditions, shorter contracts can be useful. They give you flexibility and reduce the risk of fixing at the wrong point.

 

Equally, relying on gut feel is not a strategy. The operators who navigate this well are not guessing. They are working to a plan, using data and making decisions within a clear framework. The aim is to avoid being caught by the market rather than outsmarting it. It’s a mindset shift and it shows in the results.

 

Hospitality has always been a tight-margin business and energy just keeps proving how big a variable it can be. You can’t control geopolitics or stop markets moving, but you can control how exposed you are. 

 

Be prepared. Use less. Don’t panic. Get those three right, and you move from constantly reacting to managing the situation, with a lot more clarity, control and confidence.