Brigid is rightly admired in the licensed trade for her excellent work, but I don’t feel that this is an accurate portrayal of the next 12 months, or indeed future years.
By far the greatest cost increases for the licensed trade as a whole in the next year will come, rightly or wrongly, from legislation which originates in the UK and is nothing to do with Brexit. The main increase will come from labour, as a result of minimum/living wage legislation, with additional large increases in business rates.
This issue was graphically illustrated in an excellent presentation from pub company M&B (see below). M&B pointed out that labour costs would increase by around £20million in 2017, as a result of government legislation, and business rates would increase by £18million over the following five years. In contrast M&B indicated that total costs from their “supply chain”, including the costs of goods purchased from abroad, would be negligible.
This view is in line with Wetherspoon’s experience, and indeed the experience of most other companies in the licensed trade which have made public disclosure of their costs.
The real issue for the pub trade is that pubs pay 20% VAT in respect of food sales, whereas supermarkets pay nothing, and pubs also pay business rates of about 16p or 17p per pint, compared to about 2p for supermarkets. As a result of supermarket labour costs, as a percentage of sales, being far lower than pubs’, combined with much lower business rates, pubs will need to put up their prices in the coming year far more than supermarkets to cover their costs – that is the real challenge for the industry. Unless the pub industry can achieve approximate tax equality with supermarkets, pubs will continue to close.
The issues around the excellent EU labour force are a valid anxiety for publicans, but it is not being seriously suggested by politicians that EU residents living in the UK should not be allowed to stay and most politicians are sympathetic to immigration where there are labour shortages in the UK – and these potential issues will not make a direct impact for over two years from now, in any event
It is important to emphasise that “Brexit” is not the main issue for the pub trade in the coming 12 months, although it is obviously an important political and economic issue for the future of the country generally.