Tim Martin: Rates cut a ‘move in right direction’

The Government confirmed today (23 July) that pubs, clubs and live music venues in England will receive a 20% reduction in business rates from April next year.

The move is expected to benefit almost 32,000 venues, saving the typical pub around £1,100 in the next financial year.

Wetherspoon founder and chairman Tim Martin said the announcement was an “implicit recognition” that hospitality was over taxed.

He said: “This is a small move in the right direction.

“The biggest disadvantage for pubs versus supermarkets relates to VAT, where supermarkets pay zero on food sales and hospitality venues, including pubs, pay 20%.

“This disadvantage is responsible for the ever widening gap in the price of a pint or meal in a pub compared to a supermarket.

“We hope the PM will back Tom Kerridge’s campaign for approximate tax equality for hospitality.”

Greene King chief executive Nick Mackenzie said pubs had long faced “disproportionately higher business rates” and described the announcement as “much needed relief”.

He said: “It’s hugely encouraging that the Prime Minister has chosen to prioritise our sector in his first few days in office, recognising our potential to support local economies and provide jobs in the heart of communities.

“We look forward to working with him over the weeks ahead to build on this support and deliver much needed long term reform on unfair taxation for the sector, including business rates, VAT and duty.”

‘Positive start’

Fuller’s executive chairman Simon Emeny said the announcement was a “positive start”, but added the sector still needed wider reform.

He said: “This is a positive start and I look forward to seeing the full details of his proposal in due course.

“While this provides welcome respite for pubs up and down the country, this is not yet the total reform of business rates that we have been promised by successive administrations and we look forward to working with Government on the wider reform to create a proper, fair, and clear system of business taxes across all sectors.”

Lawson Mountstevens, managing director of Heineken UK’s Star Pubs, said the move was a “hugely positive step” from the new Prime Minister.

He said: “A 20% cut to next year’s business rates makes a meaningful impact on the bottom line, and while the pressure on pubs remains high, this provides publicans with some valuable breathing space.

“We are absolutely committed to working constructively with the new Government to secure the brightest future possible for the Great British pub.”

Punch Pubs & Co chief executive Andy Spencer said the rates cut was a “welcome move” and a clear recognition of the role pubs play in communities.

He said: “At a time when our sector continues to face significant cost pressures, we hope this marks the start of a broader package of measures that recognise hospitality as a key growth sector for the UK economy.

“We are also encouraged by the commitment to return to wider business rates reform at the Budget, including a review of Small Business Rates Relief, as pubs have faced a disproportionate tax burden for many years.”

Spencer added a fairer tax and regulatory environment would allow pubs to invest, support local employment and help regenerate high streets.

Beyond pubs

Young’s chief executive Simon Dodd said the cut was a “very welcome positive step” for the pub sector.

He said: “Cutting the business rates burden will give pubs some much needed support at a time when costs remain high and operators are still facing significant pressures.

“That said, we’d like to see this approach extended across the wider hospitality sector. Hospitality businesses play a huge role in our communities, on our high streets, and in supporting the economy, so it’s important that the whole sector has the chance to thrive.”

RedCat Hospitality chief executive Richard Lewis said the announcement was welcome recognition of the pressure facing hospitality businesses, but warned support “should not stop at pubs”.

He said: “Important hospitality businesses such as hotels, inns and pubs with rooms do many of the same things as pubs; bringing people together, supporting local events and acting as vital community hubs.

“If the Government wants to protect jobs, community businesses, investment and thriving local economies, it must ensure this is recognised across the whole hospitality sector.”

Lewis said the industry still needed “fundamental business rates reform”, alongside action to address wider cost increases facing operators.

He added: “Targeting relief at only part of the sector risks overlooking the equally important contribution made by accommodation and wider hospitality businesses.”

Stonegate chief executive David McDowall said the move was a “welcome and positive step” that would give a tangible benefit to pubs in England.

He said: “I’m pleased to see Mr Burnham championing our industry and recognising just how vital pubs are to the heart of local communities.

“To build on this, I’d love to see the Government keep going, particularly around the recent hikes in employer National Insurance and our industry’s 20% VAT rate, which remains among the highest in Europe.

“But today is a strong indication of support for our sector, and we look forward to working together on what comes next.”

Wider support

Admiral Taverns chief executive Chris Jowsey also welcomed the announcement, describing it as a “positive first step”.

He said: “Today’s announcement is a positive first step which recognises the vital role pubs play at the heart of communities across the country, while providing much needed support to an industry that has faced sustained cost pressures in recent years.

“We hope that this is only the beginning and look forward to more detail on how this reform will work in practice.”

Jowsey said the current business rates system continued to place a “disproportionate burden” on pubs, often before they had opened their doors.

He added the Government should support businesses of all sizes, particularly smaller pubs, by raising the threshold at which business rates begin.

He continued: “Giving these pubs confidence to invest in their teams and communities will be instrumental in helping to secure the long term future of the Great British Pub.”

The operator reaction follows calls from trade bodies for the Government to deliver wider business rates reform at the Budget, with sector leaders warning pubs remain under pressure from employment costs, VAT and rising day to day costs.

• This story will be updated as further operator reaction comes in

Before the announcement

Before the Government confirmed the 20% rates cut, operators had told The Morning Advertiser business rates reform should be among Burnham’s immediate priorities.

Leading operators urged Prime Minister Andy Burnham to prioritise rates reform, a VAT cut and support on employment costs as he enters Downing Street.

Greene King, Star Pubs, Punch, Stonegate and Admiral Taverns told the MA the sector needed urgent action to ease cost pressures, protect jobs and support investment.

It follows Burnham’s appointment as Prime Minister earlier this week, after he previously pledged to cut business rates for pubs, clubs and music venues by 20%.

Immediate priorities

Lawson Mountstevens, managing director of Heineken UK’s Star Pubs, said the World Cup had shown “what pubs mean to this country”, with millions of people watching England’s run to the semi final in their local.

He said: “That cannot be taken for granted and the Prime Minister needs to get round the table with the rest of his Cabinet and make securing the future of the Great British pub an immediate priority.”

Mountstevens said support on business rates was needed, alongside “a lower rate of VAT for hospitality and fairer beer duty rates in line with our European neighbours”.

Greene King chief executive Nick Mackenzie said pubs were making “on average 12p in profit for every pint they sell” and needed immediate action after years of rising labour, energy, food and drink costs.

He said: “Cutting VAT to 10% for hospitality would make an immediate impact and be a vote of confidence in pubs, restaurants, hotels, cafes, nightclubs and more besides across the UK.”

Mackenzie added he was “extremely hopeful” Burnham would deliver on his pledge to reduce business rates for pubs and create parity with online retailers.

‘Greatest asset’

Punch Pubs & Co chief executive Andy Spencer told the MA that pubs remained one of the UK’s “greatest social and economic assets”, despite sustained pressure on hospitality in recent years.

He said: “Andy Burnham’s support for measures such as business rates reform and his recognition of the case for reducing VAT demonstrate an understanding of the challenges facing our sector and the contribution it makes to communities across the country.

“We hope his premiership marks the beginning of a more supportive environment for hospitality; one that backs investment, protects jobs, supports young people into work and unlocks the full potential of pubs as places that bring people together.”

Stonegate said its three key priorities were support for employment and job creation, a competitive VAT regime and meaningful business rates reform.

The pub company said the recent increase in employer national insurance contributions had “significantly increased” the cost of employing people across the sector.

Urgent reform

It added: “Hospitality is a people business and capable of creating opportunities in every town and city across the country.

“When the cost of employment rises, it is often entry level opportunities, apprenticeships and first jobs that come under greatest pressure.”

Stonegate said a targeted VAT reduction would stimulate consumer spending, encourage investment, protect jobs and support businesses at the heart of communities.

Admiral Taverns chief executive Chris Jowsey also called for urgent reform of the business rates system.

He said: “To help ensure the long term sustainability of the nation’s pubs we would ask the Prime Minister to urgently reform the business rates system, as well as decreasing individual rates payable by 20%, both of which would level up the disproportionate tax burden placed on pubs.”

Jowsey added increasing the threshold below which no rates are paid would support small businesses and wider high streets.

Trade bodies have also urged Burnham to deliver on his campaign pledges, with the sector calling for swift action on rates, VAT, employment costs and regulatory reform.