Scottish smoking ban hits pubs

Scotland's five-month old smoking ban is hitting pubs and bingo clubs, two British companies reported yesterday, giving investors more clues what to expect when similar legislation comes into force in England next year.

Greene King Plc and Rank Group Plc reported sales had suffered from the ban, but said it was too early to say to what extent smokers would continue to light up outside pubs and clubs - or stay home through the harsh Scottish winter.

Scotland banned smoking in enclosed public spaces from March 26.

Pub operator and brewer Greene King said drink sales had dropped 2.4 per cent in May, June and July from the same period a year earlier, though this had been partly offset as the new smoke-free environment boosted food sales.

"Food is rocking," Greene King chief executive Rooney Anand told Reuters. "I think it will help to offset the decline in drinks over the long haul. But we've got to wait until we've gone through a winter."

Greene King's decline was not as severe as suggested by a recent survey by the Scottish Licensed Trade Association, which said drinks sales in pubs had fallen by more than 10 per cent.

Leisure group Rank said profits at its Mecca Bingo division took a hit in the first half of the year due to the ban.

"You would expect a similar impact in England and Wales," Rank chief executive Ian Burke told a conference call.

"We're regearing some of our marketing efforts to target the non-smokers who don't play bingo, as there will be a better atmosphere for them," he added. Rank is cutting 240 jobs, most of them in its Mecca Bingo division, as it seeks to refocus on its core gaming businesses.

Leisure companies have looked at the example of Ireland, which imposed the world's first nationwide smoking ban in 2004.

According to the Vintners' Federation of Ireland (VFI), which represents more than 5,500 rural publicans, drinks sales declined, jobs were lost and pubs closed in the initial 12 to 18 months after introducing the smoking ban. The VFI cited anecdotal evidence that pub turnover was down by 10 to 15 per cent on average, and 30 per cent in some cases.

"The smoking ban in Scotland has caused a 14 per cent decline in sales in Rank's 14 Scottish bingo halls, which will raise concerns about the impact in the rest of the UK when smoking is banned from summer 2007," said analysts at ABN AMRO.

Weather could make a key difference to the effects of the smoking ban in Scotland and in milder England.

205 year-old Greene King is also better positioned in England, where it focuses on community pubs with big gardens.

Many of its 300 Scottish pubs, which it gained through the £187 million acquisition of Belhaven last August, are urban. Mr Anand said he thought if any nation was tough enough to shrug off the winter and keep visiting the pub, it was the Scots.

"If you have to subject your customers to that kind of weather, you'd want them to be Scottish," he said.