Leadership1 publisherNot yet confirmed elsewhere2 min readPublished
Worcester pub closure tests the reach of the Treasury's 20% business-rates cut
Jon Dean closed Worcester's Alma Tavern this week and let 14 or 15 staff go, saying costs had consumed a turnover of about £800,000 a year. The Treasury says its rates cut saves thousands of pubs over £1,000 a year, about an eighth of one percent of that.
The Board Room · Leadership desk
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What happened
- Dean urged the government to consider new tax cuts for hospitality venues, warning that more pubs would otherwise go under.
- The Treasury says the rates cut comes on top of a tax break on poured pints and a cap on corporation tax.
- Prime Minister Andy Burnham has described the business-rates cut for pubs as the first step in helping the industry.
- Star Pubs, which owns The Alma Tavern, said it was leased to an independent operator who took the decision to close it.
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Why it matters
- constraint The July rates cut addresses one of the four costs Dean named, so venues whose cost growth sits in payroll and VAT get little direct help from it.
- contradiction Dean blames tax, yet his own figures show regulars' drinking collapsing, so this closure cannot be read as evidence about tax policy alone.
- decision Labour-heavy operators setting staffing for the coming quarter must choose between carrying payroll in hope of Budget relief on VAT and cutting now against the rates relief already in hand.
A Treasury spokesperson said pubs "were already benefitting from a 20% cut in business rates" [7]. The department puts the saving at "over £1,000 a year" for thousands of pubs [3]. Against the £800,000 a year Dean said a pub like his turns over, £1,000 is an eighth of one percent [1][17]. The Treasury figure is a floor across many venues, and the BBC report does not give the Alma's own rates bill.
Half of the costs Dean named sit on the payroll. He said that "when you add in employer's national insurance contributions, rocketing minimum wage, rocketing VAT, business rates, all of that pressure has crippled us" [2]. The July cut reaches business rates, the last item on that list [6]. Employer national insurance and the minimum wage are both charges on the wage bill. Once "your taxes, your energy bills, your wages" were paid, he said, "it's pretty much all gone" [1].
Dean's own account also puts demand next to tax. "People used to come in four or five times a week and they'd have four or five pints, but those days are gone," he said [9]. Now, he said, regulars come "once or twice a week and they might only have a drink or two" [10]. On his figures, a regular's weekly intake fell from between 16 and 25 pints to between one and four drinks [18]. A rates saving does not bring those customers back. The case supports the view that the rates cut is small beside the costs he named. It cannot show how much of the closure was tax and how much was customers staying at home.
The Treasury aimed its relief at pubs, social clubs and live music venues [3]. The sector is asking for something broader. More than 800 businesses, top chefs among them, told the prime minister last month that without a VAT reduction more pubs and restaurants would close [11]. Allen Simpson, chief executive of UKHospitality, said the sector's tax burden had "grown disproportionately" [12]. "I hope this (forthcoming) Budget will see further backing for the entire hospitality sector," he said [13].
Dean's exit shows what an early decision rules out. He lives above the pub, is handing the business back to Star Pubs and has to find a new home [15]. An operator who leaves before the Budget cannot collect whatever relief it brings, and we do not know yet what that will be. I think the sound planning case for labour-heavy venues is the relief already announced, worth over £1,000 a year to the pubs the Treasury counts [3], with anything the Budget adds treated as a bonus.
What to watch
- Whether the forthcoming Budget cuts VAT for hospitality, the measure more than 800 businesses said is needed to prevent further closures.
- Whether Star Pubs finds a new operator for The Alma Tavern, a test of whether the site can pay its way under current costs.
- Whether the Treasury publishes rates savings by venue, showing how far individual pubs sit above the £1,000 figure it cites.