‘Business rates cap will harm pub revival’

By Stuart Stone contact

- Last updated on GMT

Discount denied: 'It leaves us with no breathing space. Essentially the discount is totally irrelevant to us,' Phil Urban, CEO of M&B, said (Image: selensergen/Getty Images)
Discount denied: 'It leaves us with no breathing space. Essentially the discount is totally irrelevant to us,' Phil Urban, CEO of M&B, said (Image: selensergen/Getty Images)

Related tags: Finance, Property, Business rates, Greene king, Wetherspoon, Marston's pub company, Mitchells & butlers, Punch, Stonegate

The Government must re-consider its proposed £2m business rates relief cap or face the continued “systemic closure” of pubs, according to Colliers International’s head of business rates.

As previously reported by The Morning Advertiser (MA),​ Chancellor of the Exchequer Rishi Sunak, announced that last year’s 100% business rates holiday for the hospitality sector would be extended three months to the end of June 2021 in his most recent Spring Budget​. 

Sunak explained that rates bills thereafter would be discounted for the remaining nine months of the financial year by two thirds, up to the value of £2m, for closed businesses, with a lower cap for those who have been able to open, for nine months. 

The cap does not refer to individual properties, but to the businesses as a whole.

However, new research by commercial property service provider Colliers has revealed that this means many large and medium sized pub chains will be hit with hefty rates bills from 1 July. 

The cap will effectively mean that, on average England’s six biggest pub groups will receive less than a 4% relief on their business rates liability – a far cry from the 66% outlined. 

How much will pub companies pay? 

Having crunched the Chancellor’s numbers, Colliers found that Greene King, Stonegate, Punch, JD Wetherspoon (JDW), Mitchells & Butlers (M&B) and Marston’s combined business rates liability for 2021/2 will be £401m.

After three months’ relief, this reduces to a total of £301m, broken down as £101m for Greene King, £22m for Stonegate, £35m for Punch, £40m for JDW, £73m for M&B and £30m for Marston’s 

Therefore, Colliers’ estimates show that none of the aforementioned operators will achieve anywhere close to the 66% discount on remaining liability given the £2m relief cap.

For Greene King, Punch Taverns, JDW and M&B, the discount is less than 6% to the end of the year, with Greene King on course to receive a discount of just 1.97% % on its £101m nine months rates bill, and M&B 2.7% on its £73m nine-month bill.

“The two thirds discount is understandable, but it’s capped at £2m, which works for a lot of hospitality businesses but for a company like mine,” Phil Urban, CEO of M&B, which employs 30,000 people across more than 1,700 pubs, said. “We’ll have to pay around £75m.” 

He added that his business can’t reopen profitably until June, and two weeks later will face a cliff edge, while also having to pay more for the furlough scheme. “It leaves us with no breathing space. Essentially the discount is totally irrelevant to us,” he added.

Company

Rates Liability 2021/2 (approx.)

Liability after three months' relief (1 July 2021 to 31 March 2022

Potential value of additional 66% discount on remaining liability

Cap (relief to be actually granted)

Actual % discount on 9 months rates bill

Greene King

£135m

£101m

£67m

£2m

1.97%

Stonegate

£30m

£22m

£15m

£2m

8.81%

Punch

£46m

£35m

£23m

£2m

5.75%

JDW

£53m

£40m

£26m

£2m

4.99%

M&B

£97m

£73m

£48m

£2m

2.74%

Marston's

£40m

£30m

£20m

£2m

6.74%

Total

£401m

£301m

£229m

£12m

3.99%

Six months rates holiday ‘at least’ 

John Webber, head of business rates at Colliers described the cap as a “sleight of hand”. 

“Pub chains were pleased that they received an extension to their business rates holiday – but many are only just waking up to the fact that the cap is for each business group, not each outlet and therefore really limits what most pub chains can expect for the rest of the year,” he explained. 

“This relief certainly won’t be significant enough to make businesses change their strategy concerning any pub closures or redundancies.

“We feel three months is not enough, given the pressure many in the sector have been through and certainly not enough time to return to normal levels of trading. 

“We recommended a six months rates holiday at the least,” Webber continued, in light of the granting of a further 12 months in Scotland. 

“We urge the Chancellor to re-think his strategy before more jobs are lost in the sector.”

Related topics: Property law

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