John Healey has been told to deliver a boost to beleaguered businesses in next week’s Budget, as pub chain Greene King pleads for relief from ‘punishing’ costs and a sportswear entrepreneur warns of a ‘steady stream’ of talent leaving Britain.
Jonathan Fearn, the finance boss of one of Britain’s largest pub businesses, and sportswear entrepreneur Thomas Beahon have joined the chorus of business leaders making eleventh-hour pleas for a Budget that will help to boost growth.
They both lamented the high taxes heaped onto businesses and individuals following Labour’s first two Budgets.
Their remarks came as George Weston, the boss of Primark and Twinings tea owner Associated British Foods, urged the new Government to help food manufacturers with high energy costs or risk its industrial strategy becoming a ‘hollow slogan’.
Writing exclusively for This is Money, Greene King’s Fearn said that a ‘cocktail of costs’ means ‘the industry is reaching breaking point.’
The brewer now hires fewer teenagers than it did three years ago and pubs face ‘difficult decisions’ to combat heavy costs.
Jonathan Fearn: Pubs must be protected from a ‘cocktail’ of ‘punishing costs’ at the Budget
Decisions from previous Chancellors – such as a surprise increase to employers’ National Insurance contributions (NICs) and inflation-busting wage increases – have been acutely felt by the sector, Fearn said.
And he said that even the new Chancellor’s already-announced policy to give pubs a 20pc reduction on their business rates will not be enough to help.
The discount, which is estimated to save £1,100 per pub, ‘pales in comparison to the scale of other cost pressures’ and will ‘almost certainly be cancelled out’ by higher wages, driven by an expected increase to the National Living Wage, Fearn said.
Fearn urged the Chancellor to confirm the cut would be ‘available for all pubs of all sizes, not just small pubs.’
And he called on Healey not to raise the rate of Machine Games Duty levied on pubs, which he said would also ‘wipe out’ the savings from business rates relief.
The country is losing around one pub a day and venues only make 12p in profit per pint sold, despite the average drink costing over £5, according to research from the British Beer and Pub Association.
Higher employment costs are ‘particularly painful for an industry that has traditionally provided that vital first step into work,’ with Greene King now employing 20 per cent fewer 16 to 20 year olds than in 2023, Fearn added.
Greene King is among the firms backing calls for the hospitality sector to receive a VAT cut from 20pc to 10pc to match other European countries.
Fearn also called for a freeze in alcohol duty and an increase in beer duty relief for pubs to ‘help to stop further unmanageable increases to pubs’ bills.
Echoing Fearn’s urgent message, Thomas Beahon, who founded the Castore sportswear brand from his ‘Mum’s kitchen table in Liverpool’ with his brother Phil, also sounded the alarm over fears that more entrepreneurs could flee Britain.
Writing on LinkedIn, Beahon said that Britain’s ‘right to win as a country in an ever more competitive global economy is slowly but consistently diminishing’.
He warned that ‘unless something changes with our approach to business and wealth creation we will continue to fall further behind.’
Castore co-founder’s warning: The Government could ‘accelerate the steady stream of talent leaving our country.’
Beahon warned that the Government will ‘continue to oversee steady decline’ if it does not use the Budget to ‘take real action to support the UK’s risk takers so they have the incentives and environment to be successful.’
Not resetting the Government’s ‘relationship with business’ will ‘accelerate the steady stream of talent leaving our country,’ he said.
Wealthy businesspeople have warned the Government against hiking capital gains tax – which they say is a tax on ambition and is encouraging people to leave the country in favour of lower-tax locations such as Dubai or Monaco.
It comes after it was revealed this month that billionaires with £120bn to their names have fled high-tax Britain since Labour came to power.
‘Britain can continue to punch above its weight on a global stage and be an attractive home for global talent but this won’t happen on its own and the need for real action is increasing every day,’ Beahon added.
The Chancellor must call time on the cocktail of costs crippling Britain’s pubs
Jonathan Fearn, CFO, Greene King
A Chancellor’s first Budget always carries added importance. As the new CFO of the nation, what will he choose to prioritise? Which sectors will he back to drive growth? How will he make sure the numbers add up?
As CFO of Greene King, I recognise that pressure around choices – every one has an impact.
The nation’s pubs have felt the consequences of decisions from previous chancellors. Each individual decision has an impact, and together government decisions have created a cocktail of costs, which have made it ever harder for a pub to run its business.
The initial choices made by this Government have been encouraging. The Prime Minister’s commitment to a 20 per cent cut in business rates for pubs from April next year was very welcome.
But the reality is this relief, estimated to save £1,100 per pub, pales in comparison to the scale of other cost pressures, and will almost certainly be cancelled out by wage inflation driven by the expected increase to the National Living Wage.
I would urge the Chancellor to confirm this cut will be available for all pubs of all sizes, not just small pubs, and not to raise the amount of Machine Games Duty levied on pubs, as an increase here would also wipe out the estimated £1,100 saving from business rates relief.
At the time of the business rates announcement, the Prime Minister said this was a first step and ‘the cavalry is coming’ to help pubs.
This was huge for us to hear, but if the Prime Minister is really committed to growth and supporting business, the cavalry must arrive at the Budget, before any more pubs have to shut their doors for good, with industry data showing a pub a day will have closed by the end of this year.
The numbers are staggering across every area of the business. Since 2019, inflation has added more than £400 million to our business costs.
Hourly pay has increased by over 60 per cent, while electricity, gas and water bills have risen by more than 50 per cent. Business rates alone now cost us £60 million annually across our 1,500 managed pubs.
To put it into perspective, despite the average pint now costing more than £5, the British Beer and Pub Association estimates that pubs make just 12p in profit from each one sold.
These pressures do not exist in isolation. They are piling up and leaving pubs with difficult decisions on investment in improvements, who they will hire and how they serve their communities.
As a result, we now employ 20 per cent fewer 16-20-year-olds than in 2023 because the same opportunities have just not been there.
With more than a million young people not in education, employment or training, this is particularly painful for an industry that has traditionally provided that vital first step into work.
It’s why the industry will watch the Chancellor’s speech on October 28 with trepidation, still carrying the scars of the previous two Budgets.
Against this backdrop, and with growing unease caused by the Government’s plans to reform zero-hours contracts, it is no surprise that a campaign to halve the crippling 20 per cent VAT rate for hospitality has been born this year and gathered support from more than 400,000 people.
Many of our European neighbours already benefit from significantly lower VAT rates for hospitality. Britain has been stuck at its 20 per cent rate for years, but the cumulative impact of rising costs means the industry is reaching breaking point.
It truly does feel like a punishing cocktail of costs when looking at keeping a pub profitable: employers’ NICs and wider significant labour cost increases, inflation, business rates bills that still remain disproportionately high and duty on a pint of beer 11 times higher than in Spain or Germany.
A cut to VAT is a single valve that can ease some of the crippling pressure, and stem the tide of closing hospitality businesses.
Freezing alcohol duty and increasing the duty relief on beer served in pubs would also help to stop further unmanageable increases to pubs’ bills.
It has been hugely encouraging to see the Prime Minister back the nation’s pubs, but if he is to truly be a champion for pubs, he needs his Chancellor to back him with action at the Budget to start reducing our costs and give pubs the breathing space we need to invest, employ and grow.
Our industry is uniquely suited to his aim of creating jobs and driving growth in every postcode, but unless we see cuts to the costs that are crippling our sector, pubs’ focus is taken away from serving their communities and instead, by necessity, their focus is simply on survival.
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