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an hour ago
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How Labour gave British pubs an almighty hangover
It is a sunny afternoon in July and The Cricketers, in Eight Ash Green near Colchester, is heaving. Pints are poured, plates of food are carried hurriedly to tables and conversation fills the air. It has every appearance of being a thriving local business. Its landlord, however, is close to breaking point. Forty-one-year-old Matthew Allum, who runs the pub along with two others in Essex, has spent his entire working life in the trade, but is worried for its future. 'I just get myself fed up now, and it brings me to tears. I keep promising my missus that it's going to get better,' he says. Allum faces almost £150,000 in extra costs this year. In a bid to keep costs down, he says he has been putting in 80 to 100-hour weeks, doing everything from pouring pints to unblocking sinks. After years of pressure, landlords like Allum are worried 2025 could be a turning point. The pub could be facing last orders – largely because of government policy. 'I don't know what it is with pubs this time around, but they really have got it in for us,' Allum laments. It was barely more than a year ago that the Chancellor was promising to 'turn the page' for Britain's pubs. Grinning as she pulled a pint in The Humble Plumb, in Southampton, in June 2024, Rachel Reeves promised Labour would revive this 'important institution'. Yet just months after the party gained power, Reeves's maiden Budget dashed any hopes of a revival. Not only would employers' National Insurance (NI) contributions rise, but the threshold at which it is paid would be lowered from £9,000 to £5,000 – lighting a rocket under the cost of employing staff. At the same time, the Chancellor announced that the business rates relief for hospitality brought in during Covid would be cut, while the minimum wage would rise by 6.7pc. The Budget was billed as a painful but necessary measure to help fix the economy and fund public services. But publicans say the unexpected tax raid has damaged their ability to invest, grow and hire staff. Sir Tim Martin, JD Wetherspoon's chairman, has said the Budget will cost his company an extra £60m a year. Young's has raised its prices by around 20p per pint to offset the extra costs. Stonegate, Britain's biggest pub company, has cited the tax raid as one of the reasons behind plans to make up to 150 head office staff redundant. Meanwhile, Jeremy Clarkson, the Top Gear presenter turned pub landlord, accused Reeves of 'using a machine gun on publicans'. 'The Autumn Statement last year was the worst Budget that I've known, and I've been working in this industry for over 40 years,' says Phil Thorley, the owner of pub group Thorley Taverns. 'They have absolutely kiboshed growth and jobs and investment in hospitality, full stop.' The lowering of the NI threshold is particularly controversial because of the number of part-time and lower-paid staff in the sector. Casual work is critical in pubs, with many young people, university students or working parents manning the bars in the hours when they can. Trade group UKHospitality, which represents pubs, bars and restaurants, has estimated the total extra cost for its members from the Budget measures will be £3.4bn per year. The impact is already being felt, with 69,000 hospitality jobs lost since last autumn. Almost a third of hospitality businesses surveyed earlier this year said they were now at risk of failure. In Essex, Allum says the combined impact of the rise in NI contributions and the lowering of business rates relief has pushed his costs up by more than £30,000, while the rise in the minimum wage has added another roughly £100,000 on top. Because of the size of his business, he does receive some relief on NI payments, but it pales in comparison to the total bill. On top of this, companies that supply his pubs have raised their prices as they pass on the added costs they face. Greene King, from whom Allum rents The Cricketers, has increased the price of its beers by more than 3pc, he says. He has had to cancel refurbishments, reduce menus and cut staff numbers by not replacing those who leave. The added stress has affected his personal life. 'My hours went up and my way of life went down. I've got a newborn baby, and last week I didn't have a single day off. I started that Monday morning, and I finished at half past nine Sunday night. 'Staff are saying to me I need to have a day off but I can't, stuff needs to get done if I want to keep costs down. Those costs might be that the sink's blocked, so I've got to unblock it – I can't just phone the plumber because I can't afford it any more.' What frustrates Allum is not just that his tax bill has gone through the roof, but that he can't see the value in it either. 'I'm all up for paying tax,' he says. 'When I saw my baby being born, and I met the midwives, they are insanely amazing people, and you talk to them, and they're like 'there is no money to renew this department'. That is bonkers. 'Then I look at the VAT I pay and the NI I pay. And then I have to work 80, 90 or 100 hours a week. Where is all of our money?' Many publicans are simply giving up. According to the British Beer & Pub Association (BBPA), roughly one pub is set to close every day in 2025. If that forecast comes to pass, it would take the number of pubs in Britain to its lowest level in a century, according to the BBPA. It is not for lack of demand. Spending in Britain's bigger pub chains is relatively stable. They grew their sales by 0.5pc in May while restaurants and bars dropped 2.5pc and 5.1pc respectively, according to data firm CGA. But there is only so much customers can bear. 'I'm not going to pay £6.50 for a pint,' says Trevor Cootes bluntly. He is a Sainsbury's delivery driver and regular at The Cricketers, among those enjoying the pub on the sunny July afternoon. Unfortunately for Cootes and others like him, higher prices seem inevitable. As Labour piles on costs, the price of a pint is climbing rapidly, topping £5 for the first time earlier this year, according to BBPA data. In many places it is already pushing £7 and in London, it is not difficult to find pubs charging more than £8 in some cases. Kate Nicholls, chief executive of UKHospitality, says the woes of the pub sector should worry Reeves. 'We are the canary in the coal mine,' she says. 'You could see that with Covid. You can see that in every financial or economic crash that we've had. If they're small or large recessionary periods … pub-going is one of the first things that is hit because it's discretionary spend.' There are few cultural institutions as cherished as the pub. As the great critic Samuel Johnson once said: 'There is nothing which has yet been contrived by man, by which so much happiness is produced as by a good tavern or inn.' Pubs have provided a place for people to gather, relax, commune, debate and escape for centuries. 'Until about the 1920s your home was a pretty s--- hovel, one roof, no separate rooms, no privacy,' says Pete Brown, author of The Pub: A Cultural Institution. 'People went to the pub as a place that was warm, comfortable. Even if people couldn't afford to buy a pint, there'd be a communal slops that you could take a drink from.' He adds: 'Before municipal buildings or local councils, there were no public buildings. So even in the 19th century, you see pubs being used for weddings, wakes, inquests, public meetings, anything that required people to get together, it would happen in the pub.' Yet this cornerstone of British life has been gradually eroded in recent decades. More than a quarter of the country's pubs have closed since 2000, according to the British Beer & Pub Association (BBPA), amounting to approximately 15,800 premises lost. 'Part of it is about deindustrialisation,' says Nicholls. 'Around factories, urban areas and heavy industry, people would more frequently end up after work going to the pub and having a drink. If you shut down a lot of those big, heavy industries, the pubs around it shut down too or don't cope. 'Over the course of that period too, you've got more women coming into work and looking for different types of outlets, so you get the birth of the wine bar, and more female-friendly brands.' New Labour's 2007 ban on smoking in pubs also irreversibly changed the trade – although the exact impact is hard to measure because it came into force shortly before the global financial crisis of 2008. To cope with the smoking ban and squeezed economy, many more pubs pivoted towards becoming gastropubs, serving high-quality food. But even this is a struggle in an era when energy costs have gone through the roof. Nowadays, pub owners are having to deal with another major shift in what people want from their local watering holes, as drinking becomes less popular. While it is commonly said that younger people are going cold on booze, it is not just Gen Z. Older people are drinking less too, prompting many pubs to start offering alternatives like coffee. Competition from other types of hospitality businesses has increased too. Speaking at an industry conference earlier this year, the boss of one restaurant group claimed that US fried chicken chains were effectively replacing pubs among Gen Z. 'I used to say in the 1980s and 1990s that our big competition was not other pubs, but Chinese restaurants, whereas nowadays that spectrum of competitive places is much bigger,' says Jerry Brunning, who runs a handful of pubs in the North West. Competition from supermarkets has hurt pubs too. Bosses have long argued it is unfair that they must pay VAT on food sales while supermarkets do not have to. It helps supermarkets subsidise alcohol to sell it at a lower price to attract customers. JD Wetherspoon's Sir Tim told The Telegraph this week that the 'widening of the selling price between pubs and supermarkets will inevitably precipitate pub closures and dereliction'. Some have also argued that the way big breweries and pub companies operate has played a role in the decline of pubs. So-called 'tied' arrangements – through which publicans rent a pub from a brewery or pub company and agree to purchase all or most of their beer from them – have been criticised as exploitative. Greg Mulholland, of the Campaign for Pubs, says: '[The Budget] is made even worse for those publicans operating under the unfair tied model, who have to pay hugely marked-up prices for beer, which in preventing many publicans making a living and pushing up the price of a pint to customers.' However, the greatest blow to pubs in recent memory was surely the pandemic and the surging inflation that followed it. Pubs had to contend with a string of surreal restrictions such as only being able to sell alcohol to customers eating a 'substantial meal'. After being forced to shut for months at a time during 2020 and 2021, many are still carrying a financial hangover after taking out government-backed loans to survive. 'We went and got an absolutely substantial loan, because we had to keep ourselves going – we're still reeling from that,' says Thorley. 'And yet, the Government then go and raise National Insurance.' As the pandemic drew to a close, pub owners were expecting a bounce-back. 'You've only got to look at what everybody wanted to do after Covid – they wanted to go to the pub and see their mates, even though [ministers] made it as difficult under the restrictions as they did,' says Thorley. Yet it was not long before the cost of everything from beer to ingredients, fuel and labour surged, driving margins lower and making it harder to turn a profit. 'In the 1980s and the 1990s we would find it easy to get 20pc or even 25pc Ebitda [earnings before interest, tax, depreciation and amortisation], whereas now it's more like 12pc or 13pc,' says Brunning. Energy costs, which soared in the wake of the pandemic, have been particularly painful. Allum went from paying between £30,000 and £40,000 a year for energy to as much as £120,000 in the years following the pandemic. Costs have only recently come down, and then only slightly. 'Energy went on beyond our wildest dreams, and it nearly bankrupted us,' he says. This led to his darkest moment: last February his business was on the verge of collapse. 'I thought it was all over. The energy costs and the food costs were getting the better of us. My mum had to inject a large amount of her inheritance into the business to stop it. That's not fair that these greedy companies and the taxman just keep taking.' Others have not been so lucky. 'When I came here in 2006 there were two pubs in the village,' says Allum. 'There is now only one. Up and down Colchester you hear them either changing hands regularly, where people just run out of money, or they just go. 'Sometimes you hear one might bounce back a little while, and I'm like 'brilliant'. I don't look at them as competitors. I'm just grateful they're all still there. I think people should have choice that is not a big corporation.' Publicans are pushing for a cut to VAT, which landlords say would allow them to boost trade and offset the impact of the Budget. Evidence from Germany appears to back up these claims. During the pandemic, German ministers cut VAT on food and drink sold by hospitality from 19pc to 7pc. When the rate reverted to 19pc, prices rose and the industry suffered. This sparked a U-turn, which will see the rate drop to 7pc permanently from next year. 'This would give me the breathing space to lower the price of food,' says Allum. He wants to see VAT reduced from 20pc to 12pc. Industry chiefs hope all is not lost. Emma McClarkin, chief executive of the BBPA, says that the autumn Budget costs were 'devastating' for brewers and pubs. But she adds: 'Labour does have time to get the sector back on track and we will work with them to unlock the potential of the sector, which will mean more growth, more jobs, and crucially keep this unique part of our heritage alive.' Industry figures point to some positive moves, such as a recently announced push to revive the late night trade and slash red tape for hospitality. This will see fresh powers handed to Sir Sadiq Khan to call in blocked planning applications in London. Crucially, the Government has brought forward plans to lessen the burden of business rates on hospitality and retail firms, which will see them charged a lower multiplier. Venues have been begging ministers to do this for more than a decade, and it is something the previous Conservative governments repeatedly failed to deliver despite promising to do so in 2015, 2017 and 2019. This could go some way towards repairing the relationship between Labour and the pub trade. But Nicholls says the timeline for support measures is 'glacially slow'. Adding to landlords' gloom is the fact that Reeves has warned tax will in fact have to rise in the autumn after a series of costly policy U-turns. With last year's Budget in tatters, helping the pub sector is likely to be low on her priority list. Jonathan Lawson, chief executive of Butcombe Group, which runs more than 120 pubs in the UK, says: 'The limit of my ambition is just stop inflicting pain.' Ultimately, 'it's the NI that is the real game changer for the sector', says Nicholls. 'Overnight it's pushed many businesses from being viable, dynamic and vibrant to being unviable and fearful for their future.' Back in Essex, Allum isn't giving up just yet. 'I love hospitality,' he says. 'I love seeing people coming in happy, having a good day, and catching up with their friends, or finishing work and just relaxing … that to me means more than having a bank account full of money. You will never ever replace the pub in a community. You can't.' But in the long run he is less optimistic. He says: 'I think pubs have 10 to 20 years left, unless something dramatic changes, unless the breweries and the big corporations and the Government suddenly wake up to what they're doing to the fabric of this country.' Gareth Thomas, the business minister, said: 'We are determined to make the UK the best place in the world for businesses to start and succeed, and that includes our great British pubs. 'We're working with industry to slash red tape and have announced a permanent cut to business rates, to ease the pressure on pubs and help them grow as part of our Plan for Change.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Washington Post
an hour ago
- Washington Post
Australia PM Albanese kicks off China visit focused on trade
BEIJING — Australian Prime Minister Anthony Albanese kicked off a visit to China this weekend meant to shore up trade relations between the two countries. Albanese met with Shanghai Party Secretary Chen Jining on Sunday, the first in a series of high-level exchanges that will include meetings with Chinese President Xi Jinping, Premier Li Qiang and Chairman Zhao Leji of the National People's Congress.
Bloomberg
3 hours ago
- Bloomberg
Labour Fails to Boost UK Living Standards After One Year on Job
UK living standards are no higher than when Labour swept to power a year ago, highlighting the problems piling up for Prime Minister Keir Starmer as he struggles to contain the rise of Nigel Farage's populist Reform UK party. Discretionary incomes tumbled 4.2% in April after a wave of bill increases and tax hikes, and failed to improve in May — the worst two months for households since the spring of 2022 when Russia's invasion of Ukraine sent energy prices rocketing, according to Retail Economics. In total, they have fallen 7.5% this year to levels seen just after Labour won a landslide victory in July last year, with the least well off hit hardest.
