Business rates could cost sector extra £900m

By Rebecca Weller

- Last updated on GMT

Autumn Budget: pubs and breweries call for the beer duty freeze to be reinstated, a reduction to VAT and a reformation of the business rates system (Credit: Getty/Deejpilot)
Autumn Budget: pubs and breweries call for the beer duty freeze to be reinstated, a reduction to VAT and a reformation of the business rates system (Credit: Getty/Deejpilot)

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Business rates bill could see a £900m hike for the sector if it were to increase in line with inflation as part of Chancellor Jeremy Hunt's Autumn Budget on Thursday (17 November).

In order to help the industry navigate a myriad of rising costs, trade bodies from across the sector have urged Hunt to recognise hospitality businesses as a “critical” part of the UK’s economic recovery, calling for the beer duty freeze to be reinstated, a reduction to VAT and a reformation of the business rates system.

This comes as new analysis from UKHospitality (UKH) revealed the sector could face a £3.6bn business rates bill next April, an increase of £900m on the £2.7bn currently paid if the tax were to increase in line with inflation and the current relief ended.

UKH chief executive Kate Nicholls said: “The Government clearly understands the pressures the sector is under due to rising costs and I would urge it not to compound issues by rising bills further.

“What it needs to do to ensure the sector survives is extend the current relief for the entire sector and ditch any plans to increase rates in line with inflation.

“Our sector has such potential to expand, deliver economic growth and support fantastic careers, but it is simply unable to do so with more and more cost being put on it at a time of national crisis.

Vicious circle

“If the Government wants to prove it’s on the side of business and drive investment, it won’t go ahead with a business rates hike that will devastate hospitality businesses.”

Nicholls continued by encouraging the Government to “deliver on its manifesto” and review the “unfair” business rates system as, under the current “outdated” arrangement, the sector is overpaying by 300%.

Additionally, the British Beer & Pub Association (BBPA), implored the Chancellor to reinstate the beer duty freeze in order to channel £360m back into pubs and breweries that have already seen average cost increases of some 22% over this summer compared with last year.

On top of this, the association warned the cost of a pint had increased by 8% compared with last year due to soaring costs and pressed the Chancellor to reinstate the beer duty freeze to keep pint prices affordable for both consumers and businesses over the festive period.

BBPA chief executive Emma McClarkin said: “We are caught in an extremely vicious circle, customers are understandably being cautious, but the cost of doing business is out of control and as a result this is set to be the toughest Christmas on memory for UK pubs and brewers.

“The last thing these pubs want to do is put prices up for customers who are struggling themselves with the cost of living, they want to provide a warm and welcoming space for their communities, especially in this acutely difficult time, but without relief from the Government it’s difficult to see how many will continue to do so.”

In addition, the association stated 50 pubs a month were now closing compared to around 30 this time last year, with Carlsberg Marston’s Brewing Company (CMBC) echoing the call for a beer duty freeze at this “difficult time”.

Critical part 

CMBC chief executive Paul Davies said: “Costs are spiralling across the whole of our supply chain, from the cost of CO2 to malt to bottles, all directly impacted by energy.

“A cut to beer duty would ease these pressures so we can continue to supply the industry at this difficult time and help keep the cost of a pint affordable for customers.”

In addition, Robinsons Brewery joint managing director Oliver Robinson urged Hunt to create “some parity” and ensure hospitality can “thrive once again” by providing the sector with a VAT reduction.

Furthermore, British Institute of Innkeeping (BII) CEO Steve Alton said while “times have never been tougher” for the industry, it has shown resilience over the past three years and, with the right investment from Government, could be a “driving force for levelling up every area of the UK”.

He added: “While [pubs and breweries] face huge challenges with rising energy costs and double-digit inflation across all areas of their businesses, they also have the power to be a key part of the economic recovery, providing thousands of jobs and career opportunities like no other sector can.

“They have been recognised as a unique and critical part of our communities and our economy by Government throughout the pandemic, and they now need the breathing space to be allowed to begin their own recovery, to the benefit of the entire nation.”

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