The Uncertain Future of Pubs
Throughout the seven months of lockdown in the UK, through struggle and disaster, one topic has consistently found itself in the headlines. Pubs. It is no surprise that it’s been at the forefront of our minds; losing access to a place so ingrained into our lifestyle will inevitably draw attention. However, it is not just British culture that makes pubs a talking point in the pandemic, it’s the very nature of their business model. Pubs rely on social interaction and profit from groups of people spending hours in the evening together. Yet new 10pm curfews, months of lockdown and social distancing laws have wrecked-havoc on the industry.
When the Prime Minister made the announcement on March 16th that the public should ‘avoid pubs’ most people probably thought little of it. The same couldn’t be said for pub owner Ben Boothmen; he estimated that he lost £15,000 with that one announcement. This extreme loss would only be the start of what has arguably been the hardest year for pubs on record. Cut to October and a recent estimate shows around a quarter of pubs could go bust before the year is over unless they receive additional Government support. IBIS states that hospitality sales contracted by 21.3% during the peak of cases earlier this year and predict a loss of 37,000 jobs in pubs and bars through next year.
These depressing figures don’t even take into account the downwards trend pubs were facing before COVID-19. Pubs already faced a triple hit of high beer duty, rising business rates and VAT. Beer duty still stands at 54.2p per pint of 5 per cent ABV beer, over ten times the rate in Germany. The last few decades have seen the industry take hit after hit and since 1990, the number of pubs in the UK has declined from 64,00 to under 48,000.
But there were signs of recovery before the pandemic – in December of 2019 there was a net increase of pubs for the first time in 10 years and the number of people employed by pubs and bars has slowly risen in the last few years and settled at around 420,000 last year. Beer sales alone grew by 1.1% last year with 8 billion pints contributing £57m to the Treasury.
So how has this situation changed due to the pandemic? There have been some upsides. In a bid to reverse the triple hit, all three areas of VAT, duty and business rates have been addressed. The planned beer duty increase was scrapped in March in a bid to protect pubs which the BBPA said could save 2000 jobs. Duties were also frozen for cider and wine (the nation’s favourite drink). VAT for hospitality was cut from 20% to 5%, and although this will have a limited impact on pubs as it excludes alcohol, it will benefit around 40,000 pubs on their food sales. Business rates too were addressed, with the discount for pubs specifically reaching £5000. However, these changes are temporary, with VAT returning to 20% in January, and the business rates changes only helping pubs valued below £100,000. There are calls to extend and broaden the changes, vocally from Wetherspoons who call for permanent tax equality with supermarkets.
While these changes and government programmes such as ‘Eat Out to Help Out’ have managed to pull back crowds to many chains, the industry still fears for its’ future. Pub chain Marston's says even with current government help, it will axe up to 2,150 jobs as a result of new social restrictions. And if chain pubs can’t handle the current market,what about the 40% of pubs that are independent? The task of saving the nation’s pubs seems too big for the government, and in an unprecedented year for the hospitality industry, there seems no sure solution.
However, the future of Britain’s pubs is not all bleak. Industry revenue is expected to recover in the next 5 years and the predicted rise in real household income should bode well. The rise of Gastro pubs will help combat long-term losses from the 25% of ‘non-drinking’ young people and the nation’s desire to ‘get back to normal’ suggests future success. There will of course be continued struggles, from our withdrawal from the EU to the impending second lockdown, and the next five years will be a challenge, but one that with the support of the government and public, pubs can hopefully succeed in.