The Chancellor has widened the duty gap between packaged and draught beer and cider in her first Budget statement since Labour’s general election win.
She announced that beer duty on draught products only would be cut by 1.7%, or “a penny off a pint”. The duty on all other alcohol products will increase by the rate of inflation.
Other measures announced, which will affect the hospitality and brewing sector, include:
- Another year of business rates relief, although at a rate of 40%, rather than the current 75%
- A full reform of the business rates regime in 2026/27, with lower rates for businesses in retail, hospitality, and leisure
- An increase in employers’ national insurance contributions
- An increase in the national minimum wage by 6.7% to £12.21 from April
- A freeze on fuel duty
The British Institute of Innkeeping says that, with only one in four businesses currently profitable, this additional cost will severely impact huge numbers of pubs across the sector, leaving them facing difficult decisions on whether they will be able to continue trading.
The reform of business rates, in England only, is welcomed, but will not protect pubs in the meantime. And the BII says the increase in employer national insurance contributions and the national minimum wage from April 2025, will have a huge impact on their profitability and threaten their existence.
A recent survey of BII, BBPA (British Beer and Pub Association) and UKHospitality members revealed that, without the continued rates relief level, more than half would be forced to reduce their staffing levels, meaning fewer hours for team members, or the loss of jobs altogether. The survey also revealed that over half would cancel any planned investment.
“These are businesses at the heart of their communities, who have invested heavily since the pandemic in their pubs, making them safe, welcoming spaces, open to all,” said Steve Alton, chief executive of the BII.
“As we head towards the festive period, they will continue to ensure their customers can connect with friends, family, and their wider community, but the quieter winter months will be incredibly tough, especially with lower rate relief of 40% on business rates, as well as increased employment costs.
‘Essential community hubs’
“We will continue to make the case for more support, alongside our members taking their challenges directly to their local MPs. This support needs to be an actual reduction in the unfair level of tax our pubs pay with a priority on a specific VAT reduction for pubs, as well as a full and urgent business rate reform, as a recognition of their vital role in connecting communities, providing local employment and supporting a host of other local businesses.
“Without this investment in their futures, we stand to lose many more of these unique and essential community hubs.”
The cut in draught duty has been welcomed by the Campaign for Real Ale (CAMRA). “This will help pub-goers as well as independent breweries and cider producers, who sell more of their products into pubs, and recognises the principle that drinking in the community setting of the local pub is far preferable to the likes of cheap supermarket alcohol,” said chairman Ash Corbett-Collins.
He welcomed the announcement of a new, lower rate of business rates for retail, hospitality, and leisure businesses, and also the cap on single bus fares, which will keep getting to the pub affordable.
He added: “Consumers are looking forward to hearing more about the previously announced policy on helping independent breweries get better access to the pub market. If done right, that should mean a better choice of locally-brewed beers at the bar in pubs up and down the country.”
John Webber, head of business rates at Colliers, said: “The Chancellor’s announcements concerning business rates today were desperately disappointing.
“Despite pre-election promises of business rates reform, nothing of significance was announced. There is to be no consultation, just a discussion document, and the measures announced hardly put a sticking plaster over the gaping wound rather bringing in any fundamental reform.”
Chris Jowsey, chief executive at Admiral Taverns, said: “Whilst we welcome the Chancellor’s announcement to cut draught beer duty for pubs, which we repeatedly campaigned for, and provide a short extension to the small business rates relief at a lower level, we are disappointed with the lack of meaningful incentives to invest and grow.
“Community pubs remain massively overtaxed, and with the wider alcohol duty still increasing, the cost of doing business is only rising for our publicans.”
‘A tsunami of employment costs’
Kate Nicholls, chief executive of UKHospitality, described the Budget as “the latest blow for hospitality businesses. Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.
“In the short-term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it. Increases to employer national insurance contributions and wages will make it harder for businesses to support employment and invest in their businesses. Avoiding the business rates cliff-edge next April was critical, and it was important that some relief has been extended.
“However, the reduced level of 40% is another cost that businesses have to deal with. For those small- and medium-sized operators, their rates bills will still go up in April. All of this means that 2025 will be painful for hospitality, with an increased annual tax bill of £3 billion for the sector.
“However, there are reasons for longer-term positivity. I am pleased that the Chancellor is implementing UKHospitality’s recommendation for a permanently lower level of business rates for hospitality. Levelling the playing field in this way recognises the importance of the high street and the role it plays in our communities and economy.”
