BBCThe Budget is “catastrophic” for the pub industry and will see the price of a pint rise by as much as 40p, a pub boss has warned.
A combination of hiking the amount employers pay in National Insurance and increases to the minimum wage and business rates has sparked fury from the hospitality industry, with many saying they will have to raise prices.
Anthony Pender, owner of two pubs and a restaurant, told the BBC businesses were “being taxed to death”, while the boss of Fuller’s pub chain said the National Insurance rise was a “crippling hammer blow” to pubs.
Chancellor Rachel Reeves said increasing taxes on businesses was the right choice to fund public services, such as the NHS.
But while she claimed she did not increase taxes on “working people”, there are concerns that increases on employers will end up ultimately hitting workers and consumers, through lower pay rises and higher prices.
Mr Pender, who employs 70 people at Yummy pubs in London, said the National Insurance rise alone would cost him an extra £44,000 a year, while his business rates would go up £37,000 from April due to discounts being reduced.
“We’re looking at a 30 to 40p increase on a pint because of employment costs,” he said.
“We all expected a rough ride, we know that difficult decisions had to be made. But it’s catastrophic, and it’s catastrophic for small businesses.”
Mr Pender said if he passed on all the extra costs to customers, he would be charging £8 a pint in “two small backstreet pubs” – a move he said would not be viable.
As well as raising prices, he said he would have to look at reducing costs, which may include reducing hours and possible redundancies.
The average price of a pint of draught lager in the UK was £4.47 in September, according to the Office for National Statistics, but the British Beer and Pub Association recently revealed that landlords make 12p profit per pint.
Louise Maclean from Signature Group, which has 20 pubs and bars across Scotland, said the tax rise would be passed on to food and drink prices in order to keep the company profitable.
“Yesterday’s Budget made us a loss-making enterprise,” she told the BBC’s Today programme, adding Signature’s staffing costs would jump by £1.7m.
“We all knew employer’s NI was going up and we all knew the National Living Wage was going to increase, but the drop in the threshold was a bit of a kicker that we didn’t see coming,” added Ms Maclean, who employs 740 people, many of whom are part-time staff on the minimum wage.
“We don’t want to change the business we are, but we also cannot fall into the red.”
‘Just utterly disappointed’
Chancellor Rachel Reeves decided businesses will bear the brunt of her £40bn total tax rise by increasing the National Insurance rate as well as reducing the threshold at which employers start paying it, to generate £25bn.
The rate that employers pay will rise from 13.8% to 15% from April and the threshold at which they start paying the tax on each employee’s salary will be reduced from £9,100 per year to £5,000.
However, the chancellor said she would extend the Employment Allowance – the amount employers can claim back from their National Insurance bill – from £5,000 to £10,500, though it will only benefit the smallest businesses.
The measures have been met with a backlash from businesses of all different sizes.
Simon Emeny, chief executive of Fuller’s which owns about 400 pubs and hotels and employs almost 5,000 people, said he was “just utterly disappointed” by the chancellor’s choices.
He claimed they “disproportionately” impacted hospitality, which is a big employer of young people and part-time workers.
He added the specific decision to lower the threshold at which employers will have to pay National Insurance was a “crippling hammer blow” to the sector.
Pubs and restaurants work to tight margins – margins that have been dealt successive blows thanks to pandemic lockdowns, soaring energy prices and the cost of living making customers spend less.
“The question is how much more can the consumer take? How much more before they say, ‘do you know, going out is a luxury, we are not going to do it as much’,” said Ms Maclean.