Bank warns of difficult 2008 for pubs

An investment bank has warned that a triple whammy of a dip in consumer confidence, growing supermarket alcohol discounting and over-capacity in eating out venues will create a difficult 2008.

JP Morgan told its clients yesterday that pub share values had fallen by an average of 36% during 2007 as the smoking ban and the credit crunch hit. The combination of economic and market conditions had created a "perfect storm" in the sector.

Analyst James Ainley said: "Caution on the consumer, a re-ignition of supermarket discounting and continued eating-out capacity growth all conspire to make us cautious."

Ainley also warned that predictions of steady trading after the smoking ban were "too optimistic" in the light of a downturn in customer spending.

He did offer a chink of light to pure restaurant operators, claiming businesses such as The Restaurant Group were better protected against the "vagaries of the smoking ban".

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By Christopher Walton