Catastrophic Rates Rise In April Will Put Thousands Of Pubs Out Of Business

Publicans in England in Wales have reacted with fury and dismay at the realisation that far from receiving clearly promised help with their business rates, the majority will instead be hit with huge hikes in their new bills, rises that will close thousands of pubs.

In the Budget speech, the Chancellor gave the impression that the Government would at last deliver long promised and meaningful reform to pubs business rates and that they were ‘supporting pubs’. However, publicans are saying that she misled the House of Commons as the reality is that pubs in England Wales will see huge rates RISES in April next year.

The awful reality facing many publicans is that they will see huge hikes in rates bills, due to the shocking and deeply suspicious revaluation of rateable values, which suddenly sees them – and rates bills for pubs – rocket, despite so many pubs struggling due to cost pressures and the cost-of-living crisis.

The Campaign for Pubs has written to the Chancellor and the Secretary of State for Business urging them to scrap the revaluation, investigate how it has happened, when clearly the values are nonsensical compared to trading conditions and levels of trade for pubs.

Distraught publicans took to messaging each other with comparisons of the increases they face, despite the changes to the multipliers announced yesterday by the Chancellor. Some pubs face rates hikes that double or treble their annual rates bill, which immediately puts them out of business.

To give just three examples that have been shared with us, from publicans seeking their new RV:

• One pub with current rateable value of £18,000 changes to an RV of £73,500 from April
• One pub with current rateable value of £22,000 changes to an RV of £86,000 from April
• One pub with current rateable value of £50,000 changes to an RV of £183,000 from April

These are shocking – and wholly unjustified – and will lead to huge hikes in annual business rates, putting many pubs out of business, with not only the loss of income for the publican and their family, but also the loss of all the jobs at the pub and the impact on the local economy and suppliers, including local breweries.

Not only do pubs lose the current 40% business rates relief in April, which had already been slashed from 75% in April this year, but the publication yesterday of the new rateable values (RVs) by the Valuation Office Agency (VOA) has revealed huge hikes in rateable values which will mean massive increases in annual business rates bills for most pubs.

The newly published rateable values bear no relation to the reality of pub profits or current trading conditions and the strong suspicion is that they have been deliberately engineered to be high – so the Campaign for Pubs has written to the Chancellor and to the Secretary of State for Business, calling for the revaluation to be scrapped and for an investigation into how such absurd valuations for pubs have been calculated.

The Government did announce a permanently lower rate for retail, hospitality and leisure setting the new multiplier at 5p below their national equivalent and promised a package worth £4.3 billion over the next three years will support (all businesses) as they transition to their new levels. But with the outrageous and unjustifiable increases in pubs rateable values, this will not stop many pubs’ rates bills rocketing – and will force many publicans out of business.

In the Budget speech, the Chancellor gave the impression that the Government would at last deliver long promised and meaningful reform to the business rates system they knew was unfairly penalising pubs. Currently the 39,989 pubs and bars in England and Wales account for just 0.4% of business turnover but pay 2.1% of the national business rates bill.

However, in yet another letdown, the Government has ignored this and left the current deeply dodgy “FMT” system of calculating pubs business rates in place, a system which also penalises many publicans with excessive rent levels, as well as rates.

Pubs rateable values are based on a small and unrepresentative sample of pubs and also based on the contrived ‘Fair Maintainable Trade’ (FMT) system. This deeply flawed methodology, which was introduced as a result of lobbying by the big pubcos who use the same disputed methodology to set unfairly high rents for their own tenants, sees pubs rates charged on the basis of an assumed turnover figure, rather than square footage.

This notional turnover is known as “Fair Maintainable Trade” (FMT) and it is supposed to be an expert assessment of what an averagely competent “Reasonably Efficient Operator” (REO) might turnover in a given site in normal trading conditions. It is a system that has consistently produced highly variable results, with valuations for individual sites often showing wild variations with each three year valuation cycle. It has resulted in pubs as a sector paying more than twice what they should overall compared with other retail businesses as it sets pubs rateable values at a higher average rate than for other sectors.

This latest revaluation, just like its predecessors, bears no relation whatsoever to the reality of trading for pubs all over England, and the Campaign for Pubs is calling for a full investigation into this.

The Campaign for Pubs is calling on the Government to do 3 vital things, unless it wants to sound the death knell of our world famous culture, something for which they would never be forgiven:

1. Cancel the April revaluation, which is so clearly flawed, unjustifiable and suspicious – and use existing values from 2026-2027
2. Commission an investigation, independent of the VOA, Government and the pub sector into how these absurd valuations have been calculated and why.
3. Deliver the genuine reform to pubs business rates from 2027 – 2028 dropping the discredited and dubious Fair Maintainable Trade system for calculating pub rateable values.

The Campaign for Pubs has also written to the Business and Trade Select Committee as there must be an investigation into how this dodgy revaluation has happened and an investigation into the whole discredited way pubs rates are calculated.

Pubs can look at the new valuations on the Valuation Office Agency here.

Dawn Hopkins, Vice-Chair of the Campaign for Pubs, and a licensee in Norwich said:
“The one thing in the Budget that was sold as good news for pubs, has turned out to be the worst news of all for the vast majority of them. This is a Business Rates Betrayal by this Government. The appalling reality is that the majority of pubs will see huge hikes in business rates

“We were misled by the Chancellor and are facing destruction due to the indefensible revaluation of pubs, which bears no relation to the reality of our businesses and the current levels of trade. It is deeply suspicious how such artificially inflated rateable values have been calculated.

“We are calling on the Government to scrap the revaluation immediately, launch an independent investigation and commit to genuine reform from 2027, scrapping the highly dubious and unfair ‘Fair Maintainable Trade’ system of calculating pub rates and rents and coming up with a fairer system. Otherwise this Government will cause more damage to pubs than any other Government in history and will never be forgiven”.

Lee Worsley, Pub Taxation Lead for the Campaign for Pubs and licensee of Coach House Inn, Winterbourne Abbas and Kings Arms, Portesham said:
“The Chancellor’s attempt to paint business rate changes as a positive thing and a saving for small businesses was a blatant misleading of parliament. This cannot be allowed to stand and she must be made to correct the record.  These proposed changes would be a catastrophe for many pubs and we urge all pro pub MPs to do all they can to change them”.

“This Government is doing everything it can to rinse as much tax from small businesses as possible. “The VOA is supposed to be arms length from Government, but they surely must have received some kind of instruction to be increasing pubs rateable values across the board for pubs that are already struggling. The strong suspicion is that the Government and VOA have somehow conspired to create these outrageous increases in rateable values, when this flies in the face of the reality of trading. This needs to be properly investigated, it defies logic and is indefensible. This dodgy revaluation cannot be allowed to go through or it will be the death knell for hundreds of otherwise viable pubs”.

Paul Crossman, Chair of the Campaign for Pubs and licensee of three pubs in York said:
“Wednesday’s Budget was a dark day for pubs. Expectations were low in the first place based on previous experience, so it was no great surprise that the Chancellor ignored united industry wide calls for direct targeted support to ease energy, employment and other costs and to consider special measures on VAT for hospitality businesses, in line with many other countries.

“Disappointing as this was, the real hammer blow was the ultimate failure to deliver the promised support on business rates. This was the one measure publicans were confident would be forthcoming, but now it has become clear that there has been a huge betrayal.

“Those of us with pubs have been running the figures overnight and in the vast majority of cases it seems that instead of the promised reduction in our bills we will be expected to pay more, in many cases vastly more, once the existing support finishes next April and the new rateable values and multipliers kick in.

“The Government knows full well how desperately pubs are already struggling amidst the ongoing cost of living crisis, and they promised us effective reforms and lower business rates bills going forward. They and the Valuation Office must now face serious questions as to why their combined efforts have so utterly failed and betrayed our vital sector by heaping yet more unsustainable costs onto so many struggling pubs at this critical moment.