‘Dwarfed by other costs’ – Why cutting business rates for pubs won’t save the sector

Andy Burnham has unveiled his long-awaited support for the UK’s struggling pubs, but the hospitality industry is contending with far more pressures than just business rates Andy Burnham’s pledge to cut business rates for pubs, clubs and music venues is expected to save each venue more than £1,000 next year in a move that comes with a £100m price tag. The tax break was welcomed by trade bodies and pub groups alike. So why did shares in some of the UK’s biggest pub firms slump following the news?

Marston’s, which runs more than 1,300 pubs across the country, shed more than five per cent of its value on Thursday, while Young’s dropped more than four per cent. JD Wetherspoon, the UK’s best known pub chain, and Fuller’s, which runs 185 pubs in the UK, opened three and one per cent lower. As welcome as a £100m tax cut was, this tepid investor reaction reveals the scale of the headwinds faced by the UK’s pub sector.

The £1,000-per-pub tax break amounts to about £25 per week which, while welcome, “hardly moves the needle,” said Alex Pugh, an analyst at Freetrade. “Any rate savings will be easily dwarfed by labour costs, higher employer NI contributions, sticky input prices, and energy bills well above historical norms. “Combined with belt-tightening consumers who are cutting back on discretionary nights out, business rate tweaks alone aren’t enough to re-rate the sector,” he added.

Applying the government’s estimates to the 793 pubs managed by Wetherspoon, the pub chain will save £872,300 in business rates next year. This leaves £41m in business rates, according to the tax paid by the pub chain last year, on top of £167m in alcohol duty, £411m in VAT and £154m in employment taxes. Mitchells & Butlers paid £79m in business rates last year, meaning a £1,100 cut at each of its 1,145 pubs would have still left it with a more-than £77m bill.

Shares in this pub firm fell five per cent on Thursday, though this was after it posted flat sales and warned of “challenging weather condi