Welcome to the era of the £6 pint
The average price of a pint in London is set to hit £6.06, almost £1 over the national average. Our pubs urgently need business rates reform to save jobs and boost growth, says Emma McClarkin
British pubs have been hit as hard as any business by the government’s economic policies, and it’s starting to cost punters dearly. With new taxes and costs hitting this month, the average price of a London pint is set to leap over the six pound mark, to £6.06 – almost a pound over the national average (£5.13).
If you work in the City that might not sound too bad. Drinkers in the Square Mile pay some of the highest prices in the city, and the £6.06 average covers all venues throughout Greater London. But the fact is costs have soared everywhere, from Kingston to Queen Street, flying up by 21p, or four per cent, on pint prices in March.
There’s no mystery why. For months, the hospitality industry has been hurtling towards a “cliff edge”. We haven’t been quiet about this at the British Beer and Pub Association. Given we represent the voice of 20,000 pubs around the country, it’s our job to be loud about existential threats to our members. We knew that the cost of running a pub would jump this April if the government failed to prevent a perfect storm of its own creation.
Publicans must be experts in the esoteric arts of the business rates regime to keep the lights on
Like any business, pub owners are having to shoulder the increase in employers’ national insurance contributions announced in the budget last October. On top of that, a bump to the National Minimum and Living Wage has a disproportionate effect on hospitality businesses, which provide entry level jobs and employ hundreds of thousands of young adults and part time workers. If that wasn’t enough, 75 per cent relief on business rates has been slashed to just 40 per cent.
The last of those measures is hard to explain if you’re not an expert in the esoteric arts of the business rates regime – something every owner of a bricks-and-mortar company now must be in order to keep the lights on. It sounds like the government is just being a little less generous with tax exemptions in a time of economic hardship. But in reality, business rates are broken, outdated and unfair. Under the current regime, this tax is taking an additional £500m out of the nation’s pubs each year relative to their fair share. Indeed, almost three per cent of business rates receipts are collected from a sector that makes just 0.5 per cent of national turnover.
Since the pandemic, successive Chancellors have extended business rate relief and frozen the multiplier that determines how much small businesses need to pay. These measures started out as an effort to keep companies afloat in impossible conditions. They have since come to feel like an admission that our system isn’t fit for purpose, and needs urgent reform. However without real reform or continued support it is practically willing pubs to close at a time when we know that as many as 289 establishments closed last year, at a cost of around 4,500 jobs. We need to support bricks and mortar businesses and prioritise real reform.
Pubs are on a cliff edge
In the meantime all these pressures are mounting, the costs going up, and they have to be passed on to the pint – if only to maintain the slim margins that keep pubs open. For some proprietors, that still won’t be enough to save their business. In the pubs that stay open, from the historic boozers of Fleet Street and High Holborn to the bars and taverns of Bishopsgate, the cliff edge will make every round that much steeper.
The Chancellor has always made the right noises on this issue. Rachel Reeves has said she wants to cut red tape and is bringing forward sensible reforms which the industry is behind. We know she appreciates the value of the British pint after she chose to reduce duty on draught products in the Autumn budget. But if the Treasury wants to stop the cost of a pint rising and help grow the sector, we need these reforms delivered urgently and in full with the maximum reductions proposed for pubs and hospitality businesses. Following the Spring Statement, a more balanced, proportionate tax regime and pulling pubs back from the brink of disaster is critical.
On the other side of the cliff edge, we estimate that the sector is now facing additional costs of £70m per month – the equivalent of 5,700 jobs in the industry. That’s all potential growth, and it’s being siphoned out of the economy rather than fuelling its development.
Business rate reform is an opportunity to change course, save jobs and get growth flowing. We should take it before it’s too late.
Emma McClarkin OBE is the CEO of the British Beer and Pub Association