With business rates climbing ever higher, Brexit forcing up the price of imported drinks and young people drinking less than ever before, could this be the end of the British pub as we know it?
By all accounts, it ought to be a golden age for British pubs. In 2016, the number of UK breweries rose by 8% to number around 1,700, whilst almost 50 new gin distilleries opened in the UK in 2015 alone. Fuelled by the growth of independent, small-batch ‘craft’ producers, one would expect the industry to be booming. So why are pubs in England and Wales still closing at a rate of 21 a week?
The most immediate threat to the British pub is the much-publicised hike in business rates. The rates, the commercial equivalent of council tax, are being reset to take into account rises in property values this April, and it is pubs, which generate 0.5 per cent of turnover across the economy yet pay 2.8 per cent of the business rates bill, and small independent businesses, that will be hit hardest by the changes.
According to rates and rents specialists CVS, 17,160 pubs will have to pay more in business rates from April, and this is just the start, with rates expected to rise by £421m in the next five years. This hike means that pubs will need to pour an extra 121 million pints to fund increases in property taxes paid to councils. CVS estimate that high business rates have contributed to one in five pub closures in England and Wales over the last six years.
Sean Hughes, landlord of The Boot pub in St Albans, said his rates are set to soar by nearly 300% in April from £14,000 a year to £52,000. “It leaves us in a very difficult situation,” he told BBC Radio 4’s You And Yours programme, “we’ve worked out we’ll have to sell an additional 22,000 pints of beer a year just to pay for the increase. I can’t see how we’re going to do that. It’ll have a huge impact on our family run business.
“It makes you wonder if it’s worth it.”
“Our prices have risen as a result of the exchange rate tumbling”
– Alex Greig, Fuggles Beer Cafe
The backlash against the surge in business rates does appear to be growing, however. Wetherspoons Chairman Tim Martin, who faces paying £8,000 more per pub in rates, has questioned why supermarkets are expected to receive further rate reductions in April, whilst UKIP MEP Bill Etheridge has also warned that the rise could risk undoing the good work of ending the beer duty escalator – which put the price of a pint by 2% above inflation every year – if it is too punitive. Chancellor Philip Hammond has suggested he may take measures to ‘soften’ the impact of rate rises in the Budget, after The Association for Licensed Multiple Retailers (ALMR) asked for more transitional relief for the sector.
Business rates aside, however, another threat looms on the horizon for British pubs, after Britain voted to leave the European Union in June of last year. The resulting fall in the value of the pound has sent the cost of imports spiraling. The impact of this on pubs is twofold. Firstly, producers using imported ingredients in their products are likely to hike prices to absorb the higher cost of their raw materials, cutting into pubs margins. Secondly, pubs that import goods directly will face higher prices. Italian wines, Belgian beers and French brandy have all become more expensive for British pubs, which either have to suck up the increases or pass them on to their clientele.
Alex Greig, owner of Fuggles Beer Café in Tunbridge Wells, has already had to increase the price of his Belgian lager by around five per cent since last June in response to the Brexit vote. “About 30 per cent of my sales are of products imported from Europe,” Greig says, “and hence our prices have risen as a result of the exchange rate tumbling.”
“I want to be investing in the business and in my staff, so ultimately it’s meant I’ve had to pass that price rise on to consumers in order to achieve those goals.”
It’s not just small-batch, luxury products becoming more expensive for pubs. Just last month, International brewers Heineken and Carlsberg became the latest beer makers to raise prices, following Carling and Budweiser in attempting to compensate for the value of the pound. Martin, an active supporter of the Brexit campaign, suggested in November that Wetherspoons would consider switching to British drinks brands if prices continued to rise.
However, not everyone thinks Brexit will necessarily be a bad thing for the industry. In a letter to the Guardian, Roger Protz, beer writer and editor of The Campaign for Real Ale’s (CAMRA’s) Good Beer Guide, insisted that encouraging UK breweries to use more British grown ingredients could mitigate for the weaker pound. However, whether these savings would necessarily be passed onto the pubs actually purchasing the beer remains uncertain.
“People just aren’t coming to the pub in the way they used to socially”
– Lucy Barron Reid, Landlord
Another huge worry for landlords and publicans is the news that people, in particular those under 25, are drinking less than ever before. The latest statistics from the ONS show that spending on alcohol and cigarettes has almost halved in 15 years as Britain seeks to become a more clean-living nation.
Dr Richard de Visser of Sussex University ‘s Centre of Innovation and Research in Childhood and Youth, has suggested that fewer young people are drinking due to having greater opportunities for socialising in non-alcoholic environments, and not having enough money after covering the costs of studying. With more than a quarter of Britons under 25 now teetotal, pubs find themselves increasingly struggling to stay afloat.
Lucy Barron Reid, who has been forced to close two of the three pubs she runs with her husband in Kent in the last six years years, said she believed changes in the way young people socialise have contributed to the decline in fortunes of British pubs.
“People just aren’t coming to the pub in the way they used to socially,” she says, “when I was growing up we used to go to the pub to meet people as our first port of call, but for youngsters nowadays their first port of call is on their telephone, via Snapchat or Instagram, and consequently we’re not finding that next generation of people interested in coming to the pub.”
“Combine this decline with the huge tax levies that the Government put on the sale of alcohol in pubs, plus the costs of heating the building and paying the staff, and there isn’t a great deal left in the pot for the publican.”
“The government needs to do whatever it can to help pubs survive”
– Tom Stainer, CAMRA Head of Communications
It’s little wonder, therefore, that CAMRA, an organisation long committed to protecting pub from closure, remain concerned by the threats posed to Britain’s watering holes. With the UK brewing and pubs sector supporting nearly 900,000 UK jobs, the rate of pub closures remains a huge concern. Campaigners have called on the Treasury to reduce beer duty by 1p a pint in next month’s budget, in the hope of mitigating against rising costs. Tom Stainer, CAMRA’s Head of Communications called on the Government to do “whatever it can” to help pubs survive.
“Pubs are facing numerous threats which make it more difficult to survive in an already difficult market,” he said.“With high taxation, changing consumer drinking habits and the recent review of business rates, the government needs to do whatever it can to help them survive.
“A duty cut is essential as it will offer a saving for customers – more than half of which perceive the price of a pint as ‘unaffordable’. Limiting further cost increases will encourage pub going and boost pub business.
“It will also boost confidence in the industry, promoting growth and investment in pubs and creating more jobs.”
Ultimately, however, beer duty reduction or not, pub owners still face a huge struggle to overcome the challenges they face in the 21st Century. It’s not quite kicking out time yet for the British tavern, but if things continue to deteriorate, it won’t be long before the landlord is calling time at the bar.