It’s a week now since Rachel Reeves’ second Budget as chancellor and it didn’t take long for hopes to turn to horror for those in hospitality.
As the season of goodwill, ironically, gets under way, it seems consumers might not spend as much on socialising this year as they keep an eye on the cost of living.
But even if they do put their troubles aside for a month and splash some cash this Christmas and New Year, the forecast for the start of next year looks grey.
One of the ways venues may do well, sadly, is because of the number of local competitors closing. Not the way the world of hospitality should be.
Over the past year, hospitality’s hopes had been raised that business rates reform was coming and long-awaited help to address rising costs was imminent. Now, not only will pubs lose the current 40% business rates relief in April, which had already been slashed from 75% in April this year, but rateable values will rocket.
The government did announce a permanently lower rate for retail, hospitality, and leisure, setting the new multiplier at 5p below their national equivalent. But the huge rise in rateable values more than swamps this benefit.
‘A stab in the back’
Currently, the 39,989 pubs and bars in England and Wales account for just 0.4% of business turnover, but pay 2.1% of the national business rates bill.
Rob Hattersley, founder and managing director of Longbow Venues, in the Peak District, says the rateable value of one of the group’s pubs is set to rise by 318%, from £49,000 to £205,000. “This Budget feels like a stab in the back for an industry that employs millions and keeps local communities alive,” said Rob. “The chancellor said she wished to support entrepreneurs and small businesses. Right now, what we are seeing is the opposite.”
The Campaign for Pubs cites a pub with a current rateable value of a modest £18,000 looking at a hike to £73,500. The group are, not surprisingly, writing to the chancellor asking for the new rateable values to be scrapped, and asking her why the rises are so steep compared to the levels of trading pubs are experiencing.
And they add that pubs’ rateable values are based on a small and unrepresentative sample of pubs, and a contrived ‘Fair Maintainable Trade’ system. “This deeply flawed methodology, which was introduced as a result of lobbying by the big pubcos who use the same disputed methodology to set unfairly high rents for their own tenants, sees pubs rates charged on the basis of an assumed turnover figure, rather than square footage,” says the campaign.
It is asking the government to:
- Cancel the April revaluation, and use existing values from 2026/27;
- Commission an investigation, independent of the Valuation Office, government, and the pub sector, into how the valuations have been calculated, and why; and
- Deliver genuine reform to pub business rates from 2027/28, dropping Fair Maintainable Trade system for calculating rateable values.
“The one thing in the Budget that was sold as good news for pubs, has turned out to be the worst news of all for the vast majority of them,” said Campaign for Pubs vice-chair Dawn Hopkins, owner of The Rose Pub & Deli, in Nowich.
“This is a business rates betrayal by this government. The appalling reality is that the majority of pubs will see huge hikes in business rates.
“We were misled by the chancellor and are facing destruction due to the indefensible revaluation of pubs, which bears no relation to the reality of our businesses and the current levels of trade. It is deeply suspicious how such artificially inflated rateable values have been calculated.”
‘A dark day for pubs’
Campaign chair Paul Crossman, added: “Wednesday’s Budget was a dark day for pubs. Expectations were low in the first place, based on previous experience, so it was no great surprise that the chancellor ignored united industry-wide calls for direct targeted support to ease energy, employment, and other costs, and to consider special measures on VAT for hospitality businesses, in line with many other countries.”
John Webber, head of business rates at international property agency Colliers, said there was a common theme on the draft 2026 Rating List — inconsistency and confusion.
“The 2023 Rating List had a valuation date of 1st April, 2021. In reality, as it was set in a Covid lockdown period, when many businesses were actually prevented from opening, these values are built on a lack of evidence.
“As the 2021 Rating List was postponed because of Covid, which had a valuation date of 1st April, 2019, and had largely been completed before being shelved, the 2023 Rating List was, in effect, a fudge on that list that never saw the light of day. As such, the base of the 2023 Rating List is built on sand and this is at the heart of the inconsistencies we are seeing on the draft 2026 Rating List.
“Our advice to businesses is: get appealing your 2023 Rating List entry before even looking at 2026!”
In the meantime, other costs continue to rise. For instance, those who have taken the decision to go green and shift to electric vehicles, for deliveries for instance, will face a new EV tax. And this will even be charged to those driving hybrid vehicles.
