Why Is the Chancellor Worried About Pub Business Rates?

The Chancellor, Rachel Reeves, has expressed significant concern over the impact of business rates on pubs, indicating that a tailored support package will be announced soon. While she has confirmed that assistance will be directed specifically at pubs, the wider hospitality sector, including cafes and independent restaurants, may not receive similar help despite calls from various businesses for more comprehensive support. This approach raises questions about the government's strategy as it navigates the post-pandemic economic landscape.

Last updated: 27 October 2023 (BST)

What’s happening now

Rachel Reeves has hinted at forthcoming support aimed specifically at pubs, acknowledging their particularly challenging situation as they face sharp increases in business rates post-pandemic. With the relief measures introduced during Covid-19 set to expire in April, many pubs are bracing for significant financial strain. Reeves stated that while there will be changes to mitigate the impact on pubs, other sectors within the hospitality industry have not been afforded the same attention, leading to frustration among smaller businesses like cafes and independent restaurants.

Key takeaways

The Chancellor is prioritising support for pubs over other hospitality sectors.
Business rates for pubs are projected to rise sharply, with some rateable values doubling.
Broader hospitality sector calls for assistance have largely gone unaddressed.

Timeline: how we got here

Key developments surrounding business rates and support for the hospitality sector include:

April 2023: Covid-era business relief measures are set to expire.
November 2022: The Chancellor's Budget announcement included broad changes to business rates.
October 2023: Rachel Reeves indicates additional support for pubs is forthcoming.

What’s new vs what’s known

New today/this week

Rachel Reeves has confirmed that targeted support for pubs will be introduced soon to alleviate the burden of rising business rates. This announcement comes as pubs report severe financial challenges, exacerbated by the end of Covid-era relief.

What was already established

Prior to this announcement, many sectors within hospitality, including cafes and independent restaurants, voiced concerns over the impact of rising business rates, but Reeves maintained that the most pressing issues were specific to pubs, which have been significantly affected during the pandemic.

Impact for the UK

Consumers and households

As business rates increase, consumers may see higher prices at pubs and potentially other hospitality venues as businesses look to offset the additional expenses. This could affect affordability for families and individuals looking to dine out or enjoy leisure activities.

Businesses and jobs

Businesses across the hospitality sector, including pubs and independent restaurants, are likely to face significant challenges, with many warning that increased rates could lead to closures and job losses. The anticipated rise in business costs may further strain already fragile supply chains.

Policy and regulation

The government’s focus on pubs indicates a strategic choice to concentrate on areas perceived as most vulnerable. However, the lack of support for other sectors may lead to calls for further policy revisions, especially as businesses grapple with the end of pandemic-related relief measures.

Numbers that matter

32%: Average increase in rateable value for pubs.
115%: Estimated increase in business rates for the average hotel over the next three years.
76%: Projected increase in business rates for pubs.
60%: Anticipated increase for gyms, pools, and leisure centres.
140%: Possible rate increase for pharmacies.

Definitions and jargon buster

Business rates: A tax based on the rateable value of commercial premises, reassessed every five years.
Rateable value: The estimated value of a property used to calculate business rates.
Covid-era relief: Temporary support measures introduced to assist businesses during the pandemic.

How to think about the next steps

Near term (0–4 weeks)

Businesses will be closely monitoring the Chancellor's announcement regarding support for pubs, as this will set the tone for how other sectors might fare in the coming months.

Medium term (1–6 months)

As businesses adjust to the new rates and any potential support, there may be a visible shift in pricing strategies, potentially leading to increased costs for consumers.

Signals to watch

Details of the announced support for pubs and its implementation timeline.
Reactions from the wider hospitality sector regarding further support measures.
Upcoming reports from business organisations on the financial health of the hospitality industry.

Practical guidance

Do

Stay informed about the latest announcements regarding business rates and support measures.
Consider adjusting business models to accommodate potential rate increases.
Engage with local business groups to advocate for broader support.

Don’t

Ignore the potential impact of rate increases on pricing strategies.
Assume that support will automatically extend to all sectors of hospitality.
Neglect to communicate with customers about any changes in pricing or services.

Checklist

Review your business's rateable value and understand how it may change.
Assess your financial projections in light of potential rate increases.
Prepare to communicate with employees and customers about changes.
Stay connected with local business networks for updates and support.
Explore ways to diversify revenue streams to mitigate potential losses.

Risks, caveats, and uncertainties

The situation surrounding business rates remains fluid, with significant uncertainties around how the government will balance support between pubs and other sectors. Businesses should remain cautious as policy changes and economic conditions evolve, particularly given the varied impacts across different segments of the hospitality industry.

Bottom line

The government's focus on pubs highlights a recognition of their unique struggles post-pandemic, but the lack of support for other hospitality sectors may lead to wider economic consequences. Businesses must prepare for the impending rate increases and actively seek ways to adapt in a changing landscape.

FAQs

What support will be available for pubs regarding business rates?

Support for pubs is expected to be announced soon, aimed at softening the impact of rising business rates. However, similar assistance for other hospitality sectors may not be forthcoming.

How will increased business rates affect consumers?

Consumers may see increased prices at pubs and other hospitality venues as businesses attempt to offset rising operational costs due to higher business rates.

What is the current status of business rates for the hospitality sector?

Business rates are set to increase significantly, with some sectors facing steep rises. Pubs are particularly affected, with average increases projected at 76% over the next three years.