Thousands of pubs at risk over escalating costs

By Gary Lloyd

- Last updated on GMT

Demands to Government: Steve Alton of the British Institute of Innkeeping
Demands to Government: Steve Alton of the British Institute of Innkeeping

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Escalating costs are threatening the future of thousands of pubs, British Institute of Innkeeping (BII) chief executive Steve Alton has told the Government.

In a letter written to chancellor Rishi Sunak and Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng, Alton demanded the Government act now on the triple threats of business rates, VAT and duty on draught products.

He said the future of the UK’s pubs hangs in the balance as their recovery is derailed by escalating costs, adding the latest member insight report from the BII highlights the fragile state the nations’ pubs. 

Its finding included 84% of BII members’ pubs’ summer trading was below levels in 2019, with 54% trading below 75%, and will, at best, be breaking even moving forward. 

Value of pubs recognised

Alton said: “The Government has now formally recognised the significant economic, employment and social value of our members’ pubs with the recent launch of the Hospitality Strategy.

“This insight from our membership clearly shows that further investment will be required by Government to safeguard the future of our nations’ pubs and enable them to be at the heart of the economic recovery.

“Our members will need trading support over the coming months and years in three key areas: a full business rates holiday for England alongside a fundamental reform of the rates system, an extension of a reduced rate of VAT for our sector and a rapid introduction of a duty cut for draught products served in pubs, to both support them and the local brewers that are dependent upon them. 

“If Government does not recognise the support that is desperately needed by our fragile small businesses in the coming weeks and months, there is a very real danger of widespread business failure in our sector.”

Pandemic-specific debt

The BII data found the impact of closure and severe restrictions over the past 12 months has left pubs with an average pandemic-specific debt of over £50,000, “which will now take more than four years to pay back”, with one in four also having insufficient funds to keep up with outgoing costs.

While one in two operators will not invest any money into their businesses in the next 12 months due to both lack of funds and levels of existing debt.

Other findings included 76% are paying higher wages to attract and retain staff with 70% of these paying at least nearly three times the rate of inflation, two in three pubs are seeing over 10% increases in food costs, a third are seeing over 10% increases in drinks costs while half have utility costs increasing over 10%.

Operational challenges are also significant with 61% not being able to recruit enough staff to keep up with their workload, 33% experiencing no-shows and supply issues, leaving 72% of pubs running out of core lines in their food and drink offering.

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