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Can business rates relief save the UK’s pubs?

Once a staple of every street corner, the great British pub is now a dying breed. Last year there was an average of 27 pub closures each week. So when the 2017 business rates revaluation was first announced, and a great number of pubs were left facing astronomical tax increases, publicans were justifiably angry.

As a direct result of rising business rates, the average price of a pint is expected to rise nationally by 5p, and more pubs are expected to close. However, there may be hope yet for many pubs, as Chancellor of the Exchequer, Philip Hammond has announced 90% of pubs are eligible for up to £1,000 business rates relief. Is this too little too late, or could it be the shot in the arm many public houses need to reverse the trend of closures?

Why were pubs set to hit so hard by the business rates revaluation?

Business rates are one of the largest costs for the pub industry. Pubs’ rates are calculated differently to other businesses, with their revaluations calculated relative to annual turnover.

Although some pubs saw a drop in business rates, a staggering 38% saw a rise. As they often occupy large spaces in prime town and city centre locations, public houses were hit particularly severely. Property experts predicted that some businesses, especially in thriving commercial centres and the south-east of England would see very dramatic changes to their rates bills.

Back in February, The Association for Licensed Multiple Retailers (ALMR - a body representing retailers in the eating and drinking sector) wrote to Philip Hammond to tell him as much. They stated that “on average, the pub sector will see a 15% increase” in business rates, adding a “further £300m to £500m in additional cost in the hospitality sector.”

Amid concerns from pubs over the the potentially disastrous consequences of the business rates revaluation, Chancellor Philip Hammond said that “recognising the valuable role of local pubs in the community, there will be a £1,000 discount on business rates for those with a rateable value of less than £100,000.”

The ALMR welcomed the move on pub rates, saying it would “safeguard investment and jobs”. Others, however, are not so optimistic.

Will Hammond’s Spring budget actually help pubs stay open?

ALMR chief executive Kate Nicholls stated that “we are pleased to see the Government acknowledge this issue and act positively to support a crucial growth champion and a sector with turnover of £60bn employing more than 1.5 million people.”

Business rates experts criticise that Hammond did not tackle the underlying problem. Jerry Schurder, who is Head of Business Rates at Gerald Eve, argues that the chancellor’s changes to the business rates revaluation shows a “spectacular lack of ambition” and ’“timewasting of the highest order”.

However, for many it could be too little too late. According to JD Wetherspoons chairman Tim Martin, this negatives far outweigh the positives. Although the rate relief is on the surface a good thing, Martin believes “that sum is dwarfed by tax and regulatory increases.”

This includes an increase in beer duty that will constitute an extra 2p per pint. Supermarkets will pay less than 2p per pint for business rates, while pubs will pay around 18p per pint.

Schurder went on to say that whilst rates relief to assist pubs and other businesses is welcome, “the longer term systemic issues have once again been kicked into the long grass.”

Pricier pints, or less of them? What does the future hold for pubs

So what does the future hold of pubs in London? Clearly, more should be done to protect this British institution. Despite the business rates relief for most pubs, the increasing taxation on the alcohol industry threatens many local watering holes up and down the country.

The UK pays 40% of all beer duty in the EU. For BBPA chief executive Brigid Simmonds, the Spring Budget puts pubs at risk. She stated that “Business Rates, auto-enrolment of pensions, the national living and minimum wage, and the Apprenticeship Levy were already adding the equivalent of 5.3p in beer duty. This latest rise will mean 4,000 fewer jobs this year, mostly in pubs. Tax rises on all alcohol will add £125 million to the cost base of pubs.”

Ultimately, despite Hammond offering rate relief to 90% of pubs, the changes in taxation will hit both the consumer in the pocket and the pub industry in the heart. Hammond’s Spring Budget does not represent a much needed boost for the industry, rather an inadequate attempt to reverse the damage done by other rate rises, and at worst an attack on pubs by out of touch MPs that much prefer to drink a bottle of Châteauneuf-du-Pape at Kensington dinner parties than a pint of bitter down their local.

This was posted in Bdaily's Members' News section by Caitlyn Stevens .