There are just six days until chancellor Jeremy Hunt presents his spring Budget, and this year the stakes could not be higher for brewing and hospitality.
Brewing and pub closures are escalating as operators face high energy prices, big business rates bills, and the effects of an extended period of high inflation.
The Campaign for Pubs wrote to the chancellor on 15th February and called on the government to understand the serious threat to pubs and small breweries from the cost of living crisis.
It is calling on the government to:
- Introduce a VAT cut to at least 10% on all hospitality/on-trade sales for 12 months to benefit all pubs, not just those that sell food or provide overnight accommodation
- Reduce the flat rate for VAT
- Cancel Covid debt for pubs with outstanding and unaffordable bounce-backack loans
- Take further and more meaningful action on energy bills for businesses
- Extend zero business rates for the next fiscal year with a revision for 2024/25
- Extend business rates relief to small brewers and producers.
Longer term, the campaign is calling for a new small retailer relief to be introduced in the VAT system, whereby independent pubs and other independent small retailers would have a lower rate of VAT than huge chains.
The latest pub closure figures from the Campaign for Real Ale (CAMRA) show local economies have taken a £100m hit from pub closures in 2023 alone.
CAMRA’s pub closure statistics for 2023 show that:
- 194 pubs were lost forever due to conversion or demolition
- 1,293 pubs closed their doors to their communities.
Having weathered the storm of the pandemic, a cost of business crisis, and ongoing financial shocks, the British Institute of Innkeeping reports that three in four pubs were not profitable in 2023. Meanwhile, those that did not make it through the year represent as much as £100m lost to local economies, almost 20,000 jobs, and 64 million fewer pints sold.
“Government inaction is putting tens of thousands of businesses on the line, and it’s vital that the upcoming spring Budget provides a 20% draught duty relief, the removal of unnecessary red tape that currently prevents the sale of takeaway pints, and a VAT cut for hospitality,” said CAMRA’s pub and club campaigns director, Gary Timmins.
“Pubs, social clubs, brewers, cider makers and consumers urgently need cohesive leadership from the government, not just piecemeal policy changes, and I hope these shocking figures are a catalyst for that shift.”
Alan Thomas, UK chief executive at Simply Business, said: “Pubs are vital for our local communities, and together with other small businesses across the UK, collectively contribute trillions of pounds to the economy.
“Set against the backdrop of a recession, we must do all we can to avoid further hospitality closures — and that starts with offering the support these small businesses so desperately need.
“Unprecedented high energy prices are one of the biggest challenges facing small businesses. With over a quarter of SMEs spending up to 40% more on energy each month, compared to last year, small business owners are calling for the government to extend the energy bills discount scheme beyond March 2024 and provide some clarity and protection for non-domestic energy users.
“Without this support, many small businesses, including pubs, will struggle to survive to see the next spring Budget.”
Confidence among the leaders of Britain’s top hospitality businesses has been beaten down by severe cost pressures, the latest edition of the Business Leaders’ Survey reveals.
The poll, by CGA by NIQ shows 41% of leaders currently feel confident about the hospitality market over the next 12 months — down by eight percentage points from October’s figure of 49%. The proportion of leaders who feel optimistic about prospects for their own business in the next year has also fallen, from 62% in October to 57% now.
It brings to an abrupt end four successive quarters of growth in confidence, and emphasises the fragility of the hospitality sector in the wake of Covid-19 and the inflation crisis. The survey found 9% of leaders believe their business is at risk of failure in 2024 — four percentage points more than in October. One in ten (10%) says their company currently has no cash reserves to draw on.
The research ighlights the cost challenges besieging hospitality. The large majority of leaders say their wage costs increased (36%) or significantly increased (62%) in 2023, and the same total say food, drink, and other bought-in costs rose (48%) or significantly rose (50%). Many leaders also reported increases in energy (81%), insurance (80%) and rent (47%).
Energy and pay costs jumped by averages of 34% and 10% respectively in 2023, the survey shows. Respondents report average vacancy rates of 10%, and a combination of shortages and a planned increase in the national living wage will add more pressure to pay this year.
Just over a week ago the British Beer and Pub Association (BBPA) launched its manifesto for brewers and pubs ahead of the upcoming general election. In the heart of Parliament there were speeches from politicians welcoming the document and the role of brewers and pubs in Britain’s future prosperity.
The speakers were joined by representatives of some of the biggest brewers and pub companies in the UK, alongside more than 30 MPs who were able to hear about the problems the sector is facing and the support required from Government for it to thrive.
Alongside the BBPA’s pre-existing demands for lower beer duty, long-term business rates relief, and a 12.5% hospitality VAT rate, the manifesto also calls for incentives and tax relief for green investments, an immediate review and holistic business impact assessment of the current packaging waste and collection reforms, and more.
“Brewing and pubs are some of the great traditions of our country,” said Esther McVey, minister of State without portfolio. “Pubs are a vital space for communities, especially rural communities, to come together. This government has provided support on energy costs, business rates, and beer duty, but we recognise conditions are still tough.”
Lucy Powell MP, shadow leader of the House of Commons, said, on behalf of the Labour party: “We are committed to supporting this sector through reforming business rates, supporting apprenticeships, and through town centre regeneration.”
Emma McClarkin, chief executive of the BBPA, said: “We have created this manifesto for Britain’s brewers and pubs to make clear to political parties of all colours what this vital sector of the UK economy needs to grow and prosper. Intelligent investment from government in the nation’s pubs and brewers will allow them to keep investing in their people and the economy, while continuing in their role at the heart of our communities.
“With the beer and pub sector supporting over 900,000 jobs and providing £26bn of value to the economy, it is clear any future government must get brewers and pubs thriving if they want to achieve long-term, nationwide economic growth, and that is what the policies in this manifesto will allow.”
