Through a glass darkly down at the local

The word behind the bar is that the combination of a lousy summer and the smoking ban have been even worse for business than the Cassandras expected.

Obviously, people drink less when the sun fails to shine, and they also drink less if they have to go outside for a smoke, so many publicans have tried to restore their margins lost on beer sales by pushing up the prices of their food, which was at any rate getting more expensive because of virulent food-price inflation.

They are, however, running into more customer resistance, which has added to their problems. Punch Taverns, with the Chef & Brewer business very much in need of a boost, is one of those said to be having a bit of a struggle to meet expectations.

The drinks industry is, of course, an industry that loves to gossip, particularly about its competitors, but the concerns have a ring of truth about them.

Giles Thorley, chief executive of Punch, was said to be toying with the idea of selling his managed pubs, but competitors suggest he may have missed the market. Not that he is likely to mind that much, having already made a pile of money out of the business, and there could be more trouble ahead for the sector.

It was interesting that Whitbread announced during the week that conditions in the capital markets were still too troubled for it to proceed with a bond offer which it had originally planned for August. It is no longer the pubs business it was, but it is still close enough to the sector for its warning to be noted.

It suggests, too, that there is no chance of resurrecting the property deal which the pure pubs company M&B had planned under prodding from Robert Tchenguiz and the shelving of which led it to make a £200 million provision against possible losses on unnecessary financial hedges.

Interestingly, the pubs in that deal were valued typically at about £3.5 million each, which sounds a bit rich for some of the M&B hostelries I have visited down the years. One wonders how confident they - or the market - would be of those valuations today.

This is something that happens in all bull markets so it was no surprise when investors came to think of pubs not as a catering business but as a property play. Obviously, when the buildings are going up in value regardless of what is happening to the underlying trading account, there is a tendency for the business side to go off the boil. Keeping it right up to the mark, dealing promptly with problems, keeping the offer fresh, constantly looking for ways to innovate - all the things that retailers need to do to keep the customers happy - become less urgent. It does not take long for the offer to look tired.

But when the property market goes off the boil, as has happened over the summer, and attention switches back to the trading account, it is not always a pretty sight.