The report estimated that 378 pubs will close this year, although the BBPA believes government reform of business rates could help ease the pressure.

Despite the challenges, the specialist finance sector still view pubs as a viable and attractive asset class to lend against.

In May, Hodge Bank worked with Arc & Co to complete a multi-million-pound loan on a pub portfolio in Wales.

“Pubs can absolutely still be an attractive asset to lend on, but it comes down to the fundamentals of the business and the property,” said Gareth Davies, senior BDM at Hodge Bank, who worked on the Wales portfolio case.

“A well-run pub, in a good location, with a strong operator and a sustainable business model, can provide steady, long-term returns,” he continued.

Gareth highlighted the security offered by pubs with freehold titles, along with ongoing confidence in the sector thanks to continued investment from both major operators and independents. He emphasised the central role pubs played in their communities and argued that a well-run establishment could remain a resilient income-generating asset.

That said, the BBPA numbers still gave him cause for concern.

“The headline figures about pub closures and industry pressures certainly give any lender pause. The number of pubs in the UK has been on a downward trend for some years, and the sector is still feeling the effects of high operating costs,” he explained.

For Gareth, if a pub was already highly leveraged, this could be a red flag for a lender, especially if trading conditions got tougher. Meanwhile, changing drinking habits could make pubs that are reliant on alcohol sales alone susceptible, with those that also offer food being better placed.

“A lack of investment across the estate to ensure that pubs keep up to modern standards is also a key concern that ultimately is likely to reflect in the financial track record of the business,” said Gareth.

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However, he reiterated certain key fundamentals — such as location and a strong operation — as being essential to a pub’s success in a competitive business environment.

Gareth also suggested that pubs could boost their success by broadening the experiences they offer — such as hosting events, providing quality dining, or adding accommodation. Since Covid, many pubs have found new ways to generate income by making better use of their spaces, including outdoor areas and tapping into the wider accommodation and hospitality markets, he said.

Gareth also noted that some large players in the market had recently invested heavily in the sector. These include Heineken, which has pumped £40m into upgrading and reopening pubs in 2025.

However, while not all pubs are fortunate enough to keep their doors open to customers, the specialist finance market has often found opportunity in these situations.

“Pubs can often have significant floor plates across multiple floors and enjoy outside space through gardens and car parks,” said Gareth.

“This doesn’t automatically mean they can succeed as pubs, but the underlying real estate can hold significant value.”

Richard Coombs, operations manager at Aspen Bridging, is among the many that see the sadness in a local community hub such as a pub closing down. However, he can also see residential opportunity opening up.

“While our lending appetite does not extend to pubs as trading businesses — due to the sector’s sustained pressure from rising costs and declining margins — from a commercial standpoint, we consider these properties in cases where they have approved planning permission for residential conversion, ensuring a clear and secure exit route.

“While these closures are unfortunate, well-executed and sensitive conversions into residential or mixed-use developments can unlock significant value for investors as well as securing the preservation of these invariably characterful and historic buildings, allowing them to continue serving local needs in new ways.”