UK publicans have been left bitterly disappointed by the first Budget from the new Labour Chancellor, Rachel Reeves MP, with a huge hike in business costs imposed on struggling small businesses, and a big cut to current business rates relief, which has been a lifeline to many pubs during this cost-of-living crisis.
Publicans and pub campaigners and the had hoped that the Government would realise that publicans are working people – extremely hard-working people – often working long hours for low pay, in many cases lower than minimum wage, so tight are the margins during this economic crisis. Pubs and other small businesses had hoped for a Budget that would deliver economic growth, something which is driven by small businesses, but instead costs are up, and support is down, with publicans now facing the stark choice of cutting staff hours and staff numbers, raising prices when customers are already feeling the pinch or closing the doors altogether.
The slashing of business rates relief is mean a 140% increase for anyone with rates payable as the rateable values and multipliers have not been touched, only the relief.
Given how overrated many pubs are this is likely to be an increase in the thousands for most pubs and tens of thousands for the largest pubs.
The only really positive measure for pubs and the wider hospitality sector is a long overdue announcement of a reform of the unfair business rates system, but this won’t come into force until 2026/27, so is of no help to publicans and pubs in the current very difficult situation.
The cost-of-living crisis has seen rising prices and business costs, including spiralling energy bills, at the same time as many consumers have had to reduce their spending. This ‘perfect storm’ of trading circumstances has led to a worryingly high rate of pub and small brewery closures.
This is made worse by the fact that pubs are having to pass on at least some of the rising costs faced by brewers and other suppliers, making visits to the pub even less affordable to those on lower and middle incomes.
The current crisis of course follows the lockdowns and restrictions during the Covid-19 pandemic, with many pubs still paying off considerable Covid debt, despite the fact trade has not returned to pre-pandemic levels, due to the cost-of-living squeeze.
The Campaign for Pubs had written to the Chancellor and expressed very serious concern on behalf of UK publicans of the potential impact on pubs of the rumoured rise of employers’ National Insurance contributions as well as a potential increase in the Minimum Wage/National Living Wage. However, this was ignored, with the Chancellor showing a lack of understanding of how difficult things are for pubs.
Many pubs and publicans simply cannot take any further increases in business costs in the current climate, given how critically marginal some businesses already are due to the cost-of-living crisis, so many pubs will now have to lay off staff or cut staff hours just to survive, meaning the loss of potentially thousands of jobs up and down the country.
The reality is that many publicans are currently taking little or nothing from their pubs, due to the very tight margins. A considerable proportion make less than their own staff and are in effect working for less than minimum wage, something that appears not to be understood by the Government seeking to impose even more costs onto struggling small businesses.
Publicans have also reacted with anger at the claim made by the Treasury that the cut in draught duty relief means “a penny off a pint in the pub” when the cost increases imposed on pubs in the budget are far greater, meaning that pubs have no choice but to cut costs – staff costs – or raise prices.
As well as the additional costs of the employers’ National Insurance rise and the rise in the National Living Wage, all non-draught alcohol duty is to go up, meaning all wines, spirits and bottled beer and cider and other products will cost more for pubs to buy.
The Campaign for Pubs is critical that the Government has fallen into the trap of the last Government and has listened to lobbyists of the giant brewers and large pubcos and not to the people who actually run pubs (and work very hard doing so).
The cut in draught duty relief is worth tens of millions of pounds to big brewers and mass produced cider manufacturers, which is completely the wrong priority for tax relief at this difficult time. The duty cuts will hardly be felt by publicans, never mind customers, but will funnel millions to the huge corporates who do not need it, not the pubs that clearly do.
Small brewers are also disappointed with the Budget, also facing the hike in National Insurance and wages at a time when an unprecedented number of small breweries have been forced out of business with rising prices and sky high energy bills. Whilst the draught duty cut does benefit them (and small cider makers) it hugely disproportionately benefits the global brewers and industrial cider manufacturers and allows them to further increase their dominance over the UK market.
Dawn Hopkins, Vice-Chair of the Campaign for Pubs and a publican in Norwich said: “Just when pubs & the wider hospitality sector, especially small operators, needed support to get through the cost-of-living crisis, instead they face significantly higher National Insurance & wage costs with a big drop in business rates relief. Many pubs will have to reduce staff hours & numbers or put prices up. Whilst the announcement of a reform of the unfair business rates model is welcome, this does nothing to help during this current crisis and will be too late for many hospitality businesses due to the serious ongoing economic situation.
“The small cut in draught duty relief does nothing to compensate for the hike in costs on small businesses and won’t help publicans or customers who won’t see any impact. Instead, this funnels tens of millions of pounds to the global brewers and giant producers, who don’t need the help, which is so clearly the wrong priority at this current time. It’s high time the Treasury listened to people who actually run Pubs and not to those lobbying on behalf of the big brewers and giant pubcos.
“Overall, this is a very disappointing budget for pubs that fails to understand how hard publicans are working to serve their communities and keep pubs running. Publicans are working people – very hard-working people often on less than minimum wage – and yet the Government has failed to recognise that in our hour of need.”
Paul Crossman, Chair of the Campaign for Pubs and a publican in York said: “We understand the dire current state of the nation but we expressly wrote to the Chancellor prior to the Budget to stress how little extra most small-business pubs could realistically afford to contribute given their highly precarious condition following years of neglect of our sector by previous governments. Our pubs already contribute a disproportionate amount of tax via punitive VAT rates and an unfairly skewed business rate system, so finding any extra was always going to be a struggle for most. Now these new changes to employer costs and business rates will require the vast majority of pubs to somehow contribute many thousands of pounds more – indeed tens of thousands for larger venues.
“These new cost pressures, which will of course also feed up to pubs via increased supply chain costs, will inevitably mean higher prices at the bar and, sadly, will very likely affect staffing levels in pubs where this is the only remaining way to ensure business survival. So, contrary to the unhelpful and very public claims made by the Treasury, the draught duty cut of one penny will not help a single pub or reach a single customer – although the very largest and most dominant businesses, who as ever lobbied hard for the cut, will doubtless enjoy the windfall it provides them.
“It is now more urgent than ever that the Government listens to the voice of the small businesses who are the bedrock of our wonderful UK pub and beer sector and puts in place the real reforms needed for our sector, before it is too late.”
Phil Saltonstall, brewer representative of the Campaign for Pubs and founder of Brass Castle Brewery said: “I’m pleased, as an employer, that effort is being made to ensure that vital public services remain available to the staff who make our company what it is. I am saddened however, that extra competitive advantage has again been handed to the multi-national beer factories who have sewn-up the bulk of our national pub stock.
“1p off a draught pint is a huge fillip for any multi-national brewery supplying gazillions of pints into a tied pub market that they effectively own and hundreds of UK brewers are denied access to – but it’s largely irrelevant for small brewers and won’t be at all noticeable to pub-goers. Pub-goers will instead be served a 30-40p hike on their pint prices to cover minimum wage and National Insurance increases. Which, ironically, will not be a significant issue for the problematic volume-sellers like supermarkets, who will continue to offer alcohol products at way below the price that safe, monitored drinking environments (pubs) can achieve.
“Draught duty relief was sold as helping to level the playing field for alcohol sales between pubs and retailers and thereby encourage responsible drinking in a monitored environment. Like so many other government measures in this area, it has been hijacked and championed by big beer lobbyists who spy a tax relief that they most-assuredly will not pass on to consumers. At a vaunted 1p/pint, most consumers won’t even notice that they are missing out, while the big beer accountants ring up the win.”
