The British Beer and Pub Association is calling for immediate Government action as a new report from Frontier Economics suggests energy bills 300% higher than pre-pandemic levels combined with tax pressures are the reason for the dire economic climate facing the beer and pub sector. As British Summer Time comes to an end, predictions of another cold winter and continued price volatility due to geopolitical tensions means that the industry is looking at the loss of another 750 pubs in the first half of 2024.
Unless the Chancellor acts in the Autumn Statement just three weeks away, the beer and pub sector faces not just sky-high energy bills, but the double hammer blow of a £12000 business rates increase and a beer tax hike of unknown size, which many pubs will fail to survive. All of which combines to paint a dire economic outlook for Britain’s historic pubs.
With pub closures in England, Wales and Scotland already having spiked by 75% in the first half of 2023, the continuation of that trend will result in around 750 pubs calling last orders for the final time in the first half of next year. As a result, the BBPA are urgently calling on the Government to extend small business rates relief, rule out an increase in beer duty and implement the recommendations of Ofgem’s review of the non-domestic energy market. This action will protect pubs that are integral to communities and drivers of local growth throughout the country.
Energy prices remain the number one reason for pub closures. Despite this, the Government significantly scaled back support for pubs earlier this year, with energy bills estimated to be almost £20,000 higher over a year as a result. Pub closures are increasing sharply, with the number of closures in the first half of 2023 almost as high as in the entirety of the year before leading to major brutal projected rate of closure in future.
There has been a 43% overall cost increase for pubs since 2019, however, the Frontier Economics report outlines that beer has only increased in cost by 12% in the same period This is half of what other consumer goods have increased on average, as pubs and brewers have absorbed the wider cost increases so that they can to keep beer affordable for their loyal customers who have seen their budgets stretched due to the cost of living crisis.
The beer and pub sector as a whole provides £26bn of value for the British economy and almost one million jobs across the supply chain. Moreover, this brutal economic climate for pubs and brewers specifically is set amidst the backdrop of a cost-of-living crisis that has left consumers with significantly less disposable income, putting further pressure on pubs as customers spend less.
Tim Black, Associate Director of Frontier Economics said: “The economic pressures facing the pub and brewing sector remain substantial, as our latest report shows. Record cost inflation has had to be passed on through higher prices for businesses to survive, despite consumers cutting back on spending due to severe cost of living pressures. While inflation rates have eased, costs & prices are not expected to fall back to earlier levels, and consumers continue to face very tight budgets. Meanwhile as government support measures on energy and business rates tail off, and alcohol duty is raised, this creates further cost pressures to manage.
“The sector is working to mitigate and adapt, but some business failure is inevitable. It may be important to look for areas where targeted support can help to offset the worst of this, given the key role the sector plays in communities across the UK.”
Emma McClarkin, Chief Executive of the British Beer and Pub Association said: “The crisis our pubs and brewers are facing in paying their sky-high energy bills never went away, and the cliff-edge faced earlier this year as the Government withdrew support means pubs will again face a struggle to afford to keep the lights on and the bar warm this winter. Meanwhile, they also face on average per pub a £12000 increase in business rates next April and a tax hike of an unknown amount. These are economic circumstances no sector could wholly survive.
“The Government must intervene to stop the decimation of our sector, and the jobs and prosperity it brings to towns and villages across the country. By ruling out the massive increase in business rates and beer duty both scheduled for next April and implementing the recommendations of Ofgem for regulation of the non-domestic energy market, the Government has the chance to return pubs to the invaluable engines of truly nationwide economic growth that they have potential to be.”