The Government must re-consider the £2 million cap it is proposing to place on business rates relief for the beleaguered pub sector.
The systemic closure of pubs and jobs in the sector will just continue when its 3 months business rates holiday ends at the end of June says John Webber, Head of Business Rates at Colliers.
When the Chancellor announced in the Budget that last year’s 100% business rates holiday for the hospitality sector would be extended three months to the end of June 2021, he said rates bills afterwards would be discounted for the remaining nine months of the financial year by two thirds, up to the value of £2million for closed businesses. However, the cap does not refer to individual properties, but to the businesses as a whole.
Research by Colliers has revealed that this means many large and medium sized pub chains will be hit with hefty rates bills from 1 July. The cap will effectively mean that on average the six major pub chains will receive less than a 4% relief on their business rates liability- a far cry from the 66% outlined. We have estimated the amounts the main pub operators will be paying.
Research Colliers (Estimations)
The table above looks at the business rates of the top six pub chains, estimates their total yearly bill, what they have left to pay after the 3 months business rates holiday finishes- i.e. from July 1st onwards, what sort of saving a 66% reduction would have meant if granted without a cap and what percentage of discount the pub chains will actually receive on their rates bills with the cap in place.
Our estimates show that none of the pub chains below get anywhere near receiving a 66% discount on their remaining nine months rates bills and for Greene King, Punch Taverns, JD Wetherspoons and M&B, the discount is less than 6% to the end of the year. Greene King will receive a measly 1.97% % discount on its £101 million nine months rates bill, M&B 2.7% on its £73 million nine months bill.
No wonder the major pub chains have complained. Phil Urban, the CEO of Mitchells & Butlers, which employs 30,000 people across more than 1,700 pubs, was reported* as saying “The two thirds discount is understandable but it’s capped at £2m, which works for a lot of hospitality businesses but for a company like mine….we’ll have to pay around £75m.”
He explained that the business can’t reopen profitably until June, and two weeks later will face a cliff edge, while also having to pay more for the furlough scheme. “It leaves us with no breathing space. Essentially the discount is totally irrelevant to us.”
John Webber Head of Business Rates at Colliers added, “The cap is a sleight of hand. Pub chains were pleased that they received an extension to their business rates holiday- but many are only just waking up to the fact that the cap is for each business group, not each outlet and therefore really limits what most pub chains can expect for the rest of the year. This relief certainly won’t be significant enough to make businesses change their strategy concerning any pub closures or redundancies.”
The beer and pub sector has been one of the most adversely affected sectors by Covid-19 and the lockdowns. In 2020 alone, according to the BBPA (British Beer and Pub Association) a combination of restrictions on trade and lockdowns saw sales of beer in pubs plummet by 56%, a decrease of £7.8 billion.
Earlier this year Marson’s boss Ralph Findlay said an extension of the business rates holiday and VAT relief measures throughout 2021 would be the “minimum requirement” needed to help pubs get through the pandemic.
Pubs are hoping to bounce back as the government lifts its COVID-19 restrictions, but currently with pub goers only able to drink outside, full recovery is limited. The sector will only see the full lifting of restrictions on 21 June, just before the business rates cap comes into play in July.
Colliers has campaigned for a longer rates 100% holiday. “We feel three months is not enough, given the pressure many in the sector have been through and certainly not enough time to return to normal levels of trading. We recommended a six months rates holiday at the least.”
In Scotland a 12 months holiday was granted.