Time at the Bar: Will the Budget Hurt the Pub Industry?

A “painful” budget was promised, and for some, that’s exactly what was received. As expected, it was businesses that were deemed to have the ‘broad shoulders’ needed to carry the burden of the treasury deficit.

The chancellor’s measures will hit some industries harder than others, with UK pubs being an interesting case. A number of the budget announcements will affect pubs both positively and negatively, leaving it unclear how they will fare once they’re implemented.

Given the differences in size and setup from one pub to another, it’s not easy to gauge how the sector will react to the changes, but we’ve looked at the main points raised and the impact they may have.

 

National Insurance changes – Potential problem

The government announced plans to increase National Insurance contributions for employers but not employees. This will take the form of a rise in contributions needed from 13.8% to 15% and the threshold being dropped to £5,000.

This could have a significant effect on chains and larger pubs’ finances. Though those with small teams may not notice this as much.

 

Employment Allowance – Potential benefit

The main reason for smaller pubs not feeling the pinch from National Insurance as much is the change in Employment Allowance. Businesses with an annual National Insurance liability of less than £100,000 will be entitled to cut in their NI contributions.

Previously, the government would allow employers to reach up to £5,000 in contributions before they’d have to pay, but this has been increased to £10,000. This is roughly equivalent to the amount of National Insurance an employer would need to pay for four employees on National Minimum Wage.

For pubs with a small workforce or workers on short hours, this will be a boon that sees them avoid the increase in contributions and drop in threshold that may harm larger businesses.

 

National Minimum Wage increase – Potential problem

The pub trade often has workers employed on or around National Minimum Wage. As such, the increase will be felt quite significantly here. The rise from £11.44 to £12.21 is large enough, but having the rate for 18-20-year-olds increased from £8.60 to £10.00 an hour could have an even bigger toll for some.

With many 18-20-year-olds employed in pubs and bars, this change promises to rock businesses that predominantly hire students and other young people.

 

Draught drinks duty reduction – Potential benefit

The ailing pub industry has been lobbying for government help for some time now, and the 1.75% reduction in duty for draught beer and cider seems to be an attempt to placate landlords and landladies.

Despite cutting a penny in duty off every pint pulled, this measure has unfortunately got lost in the more negative aspects of the budget. After all, if the assumption is that the budget changes will leave your business worse off overall, why would you celebrate a relatively small reduction that merely means you just lose slightly less?

Still, as draught drinks make up 60% of what is drunk in UK pubs, it’s still a useful cut and a step in the right direction.

 

Non-draught drinks duty increase – Potential problem

Unfortunately, while one hand gives, the other takes away in terms of alcohol duty. All non-draught alcoholic drinks will increase in line with the Retail Price Index (RPI) from April.

 

Permanent reduction in hospitality business rates – Potential benefit and problem

As pubs and restaurants often occupy large premises, business rates have long been a hot topic for the hospitality sector. The previous government had put a temporary 75% reduction in place that was due to end April 2025, but many had called for a more permanent measure.

To that end, they’ve got what they asked for: a permanent reduction in business rates for those in retail, hospitality and leisure. The only issue is that it’s a 40% reduction rather than 75%.

While this will soften the cliff edge that those in hospitality were worried about in April, they’ll still need to contend with what amounts to a 35% increase.

There’s no doubt that a permanent measure had to be introduced, but with so many struggling while the cut was at 75%, we can probably expect to see more pubs continue to fall in the near future.

 

A sector in trouble

The great British pub occupies a place in many hearts, but the sad fact is that societal changes have rendered many no longer viable. Once the centre of every community, public houses ceased to be the social hangout that they were long ago. As such, the UK were left with many more pubs than a new generation needed, and we’re still seeing the slow culling to this day.

Add to that many other factors, such as lower-priced drinks in supermarkets and a generational switch to healthier activities, and it’s clear how some pubs would struggle even before any budget changes.

Reports show that in the first half of 2024, more than 50 pubs closed each month. It would be a brave person that bets against at least a similar rate of closures in 2025.

 

Are you worried about your bar or restaurant struggling under the changes?

Affected owners are advised to take action as soon as issues start to occur. If you’ve started to notice that cash flow reserves are becoming stretched or that takings are down, make sure you give one of our friendly specialists a ring.

With a range of solutions aimed at making life easier for business owners, Forbes Burton can help you to successfully navigate your current difficulties. Get in touch for a free consultation today to see how we can help. Call us on 0800 975 0380, or email [email protected] for your free consultation with no obligation.