12p a Pint: The Struggle for Survival Facing UK Pubs
Posted by Emma on 25th Oct 2024
As the UK’s hospitality industry braces for potential upheaval, many pubs may face closure without renewed support from the government in the form of business rates relief. Stonegate Group, the country’s largest pub company, owns popular chains such as Slug & Lettuce, Yates’s, and Walkabout, among those raising concerns about the future of the pub sector. According to David McDowall, the CEO of Stonegate Group, current economic pressures mean that some pub landlords are making as little as 12 pence in profit for each pint sold.
Dominic Nelson, CC BY-SA 4.0, via Wikimedia Commons
The current rates relief programme, introduced to support hospitality businesses during the Covid-19 pandemic, is scheduled to end in April. If the Chancellor does not extend this relief in the upcoming Budget, smaller pub owners could see their business rates costs increase fourfold, which, according to McDowall, would be an unsustainable blow. For the past three years, the relief measure has offered businesses in England and Wales a reduction of up to 75% on business rates, capped at £110,000, while businesses in Wales received 40% relief.
McDowall highlighted that this impending “cliff edge” arrives amid a challenging economic landscape. The industry has been navigating multiple crises: the lingering financial effects of COVID-19, energy price hikes following the Ukraine conflict, rising inflation, and reduced consumer spending due to the ongoing cost-of-living crisis. He emphasised that pubs, bars, and cafes nationwide could face dire financial consequences without continued relief.
Recent British Beer and Pub Association data indicates that the average price of a pint of lager reached £4.79 in September, yet profit margins remain critically low. Industry bodies, including UKHospitality and the British Retail Consortium, echo these concerns, pointing out that hospitality businesses paid close to £9 billion in business rates in the past financial year, constituting nearly a third of total revenue from business rates. Removing the relief would burden the hospitality and retail sectors with an additional £2.5 billion.
Stonegate CEO David McDowall warns of pub closures without extended business rates relief.
Earlier this week, UKHospitality called on the government to uphold Labour’s pledge to reform the business rates system, arguing that the current method — based on potential rental values — disproportionately impacts businesses in central areas like High Streets. The organisation claims that the high costs tied to central locations without significant reform will deter investment, reduce employment, and lead to increased business failures.
The Treasury has responded to these appeals, expressing a commitment to reform the business rates system to provide fairness and stability. A spokesperson indicated that the government is also working towards a capped corporation tax rate and a comprehensive corporate tax roadmap to enable businesses to plan more effectively.