Call for cut in beer duty as one in ten pubs faces imminent closure

They are calling for a cut in beer duty to bring down the price of a pint along with radical changes to business rates to cut the cost of doing business

An astonishing one in five pubs are technically insolvent with one in ten at risk of imminent closure, according to a new study. The extreme financial peril faced by thousands of pubs and bars threatens to leave a black hole at the heart of many communities without urgent action say industry leaders.

They are calling for a cut in beer duty to bring down the price of a pint along with radical changes to business rates to cut the cost of doing business. Chief executive of the British Beer and Pub Association, Emma McClarkin, said: “For generations the pub has been the beating heart of communities, offering a warm welcome, fending off loneliness, and bringing people together.

“Pub closures hurt not only landlords and staff, but the very communities they serve. This Government must recognise the important part pubs play and cut the soaring cost of doing business. They must use the Budget to reform business rates, maintain the 75 percent business rates relief, and cut beer duty. Without action to support pubs our communities will be lonelier and more isolated than ever before. Let’s keep the doors open.”

A survey by the accountancy firm Price Bailey of the UK’s 37,961 pubs and bars found that 20 percent - 7,445 – are technically insolvent. In addition, 4,310 (11 percent) were found to have a commercial credit score in the Maximum Risk category which puts them at immediate risk of closure – up by 930 on a year ago.

Price Bailey’s head of the insolvency and recovery team, Matt Howard, said: “These businesses will find it almost impossible to access extra funding unless the owners provide personal guarantees, which few are likely to do in the current climate.”

Based on analysis of credit risk scores and balance sheet information, the figures also revealed there were 378 pub insolvencies in the first half of this year, which is the equivalent or around two pub businesses closing every day. The firm said the hospitality sector has been squeezed by high energy, labour and wholesale food and drink costs. At the same time the disposable income of pub-goers has struggled to keep pace with inflation in recent years.

Mr Howard said: “Pubs are restricting opening hours due to staff shortages, rising overheads and declining footfall. Many are having to sacrifice long term customer relationships on the altar of profitability as they focus on the busiest hours.”

The accountancy specialists warned that a likely big increase in the minimum wage and proposals to ban smoking in pub gardens are likely to add to the pressure and closures. He added: “The inflation rate for pubs remains stubbornly above the core rate with little sign of relief. If the Government announces an inflation-busting hike to the minimum wage in the Autumn Statement, many pubs that are currently on life support are likely to flatline.

“Workers in the pub trade have been among the chief beneficiaries of rises to the National Living Wage, which has been hiked by over 40 percent in five years. Even when pubs see improved turnover wage costs mean many firms remain in the red for large parts of the trading week.”